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Who's a major? A novel approach to peer group selection: Empirical evidence from oil and gas companies

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  • Asche, Frank

    (UiS)

  • Misund, Bard

    (UiS)

Abstract

This study presents a novel approach to selecting comparable companies in equity valuation. While valuation multiples is probably the most common valuation method in practice, discounted cash flow and residual income valuation models are advocated by academics. A key aspect in valuation by multiples is peer group selection. In this paper we examine the usefulness of econometric techniques in peer-group selection for the largest companies in the international oil and gas sector. Using Chow tests we are able to identify firms with similar relationships between valuation multiples and relevant value drivers.

Suggested Citation

  • Asche, Frank & Misund, Bard, 2015. "Who's a major? A novel approach to peer group selection: Empirical evidence from oil and gas companies," UiS Working Papers in Economics and Finance 2015/18, University of Stavanger.
    • Handle: RePEc:hhs:stavef:2015_018
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    References listed on IDEAS

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    3. Bård Misund & Petter Osmundsen, 2017. "Valuation of proved vs. probable oil and gas reserves," Cogent Economics & Finance, Taylor & Francis Journals, vol. 5(1), pages 1385443-138, January.

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    More about this item

    Keywords

    Oil and gas companies; valuation; valuation multiples; peer groups;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • Q33 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Resource Booms (Dutch Disease)
    • Q35 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Hydrocarbon Resources

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