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Improving The Accuracy Of Estimated Intrinsic Value Through Industry-Specific Valuation Models

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  • Yanfu Li

Abstract

This study aims to improve the accuracy of estimated intrinsic value by the industry-specific valuation model. Different industries have unique characteristics. As such, they should be valued by different valuation models. This study offers a comprehensive overview of the characteristics of financial and information technology industries and identifies the appropriate industry-specific valuation models for each industry. As the features of firms may still vary greatly even within the same industry, this study further classifies each industry into several sectors according to the Industry Classification Benchmark. After that, a series of corresponding valuation models for each sector are recommended. Detailed explanations for the recommendations are provided for each sector. This study contributes to the literature of valuation methodology by identifying the corresponding valuation models for different sectors/industries. More accurate estimation of intrinsic value can be expected as a result of more compatible valuation model.

Suggested Citation

  • Yanfu Li, 2021. "Improving The Accuracy Of Estimated Intrinsic Value Through Industry-Specific Valuation Models," Review of Business and Finance Studies, The Institute for Business and Finance Research, vol. 12(1), pages 79-89.
    • Handle: RePEc:ibf:rbfstu:v:12:y:2021:i:1:p:79-89
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    References listed on IDEAS

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    4. Cristi A. Gleason & W. Bruce Johnson & Haidan Li, 2013. "Valuation Model Use and the Price Target Performance of Sell†Side Equity Analysts," Contemporary Accounting Research, John Wiley & Sons, vol. 30(1), pages 80-115, March.
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    More about this item

    Keywords

    Industry Characteristic; Industry-Specific Valuation Method;

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General

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