The study of relation between fundamental value and market capitalization of companies in the telecommunication industry during the period of economic crisis

Abstract

In this paper the interrelation between fundamental value estimates obtained utilizing income-based methods and market capitalization of companies during the period of recent economic crisis of 2008 is investigated. The research focuses on telecommunication industry in particular. The study concludes that the book values of equity and residual earnings as components of residual earnings valuation model can explain market capitalization of companies in the telecommunication industry and can be used during both periods of economic growth and crisis as a reliable instrument of equity valuation.