Analysis of influence of dynamic of residual earnings on quality of valuation using Ohlson model on Russian market in different macroeconomic cycles

Abstract

Analysis of the influence of historical residual earnings dynamic on quality of company’s value assessment using Ohlson valuation model and comparison of the results in different economic cycles Objectives: 1) Construction of the model 2) Analysis of applicability of new model by statistic results analysis and by implementation of unified model in real cases 3) Comparison the regression results in different economic cycles 4) Analysis of conclusions from the results obtained Main results: 1) Two modified models were constructed (two and three years of RE dynamic) 2) Modified Model consider two year of RE showed best results (for the whole period (2004-2011) 3) After the statistical analysis it was stated that the separation of the sample on the three part (on Cycles) will be useful for the model accuracy and increase of explanatory power 4) After the construction of the models for the Cycles, the results were: Growth Cycle – best model is MM considering largest period of dynamic (three years); Crisis Cycle – the Original, static model is the best; Recovery Cycle – the best is MM with only two periods of RE 5) The practical part (analysis of IPO cases) shows the decrease of errors with separation of sample on cycles To sum up, it was concluded that the historical dynamic has relation to the market value of the company and its implementation in the model increase its explanatory and predictive power. Moreover, another result is that the macroeconomic cycles do matter and the models constructed particularly for the each cycle in general dive better results.