A regime switching Ohlson model

Abstract

This paper proposes a regime-switching version of the Ohlson model (Contemp Account Res 11:661-687, 1995). We assume that abnormal earnings and the other information variable follow a regime-switching dynamics, which represents a simple yet rigorous way to incorporate the stochastic volatility pattern revealed by financial variables. We derive closed form formulae for market values of equity and show that the resulting model is still tractable. In our empirical investigation we consider firms from the USA stock market during the period 1980-2011 and find that the regime-switching model improves upon the traditional Ohlson model in predicting market prices.

The value relevance of corporate financial and nonfinancial information provided by the integrated report: A systematic review

“…The association investigations are carried out through value relevance regressions and provide evidence of the market-accounting value association when the coefficients of the regression have an autonomous value relevance (i.e., the coefficient is significant and varies in the predicted direction). TheOhlson (1995) is the best known, and most used, of the models of value relevance as it is a rigorous yet parsimonious model, easy to implement empirically, that relates the firm market value and fundamental variables in the accounting literature, such as earnings and book value(Leccadito & Veltri, 2015;Silvestri & Veltri, 2011).…”

The explanatory value of intrinsic equity valuation models for share price variations: A survey of recent approaches

“…Furthermore, studies in which only predictive applications of these models (cf. Skogsvik & Skogsvik, 2010;Tswei & Kuo, 2012;Kuo, 2016;Leccadito & Veltri, 2015;Zheng, Wang, Song, Wu & Zhai, 2020) or only equity-option pricing applications were examined (cf. Liu & Liu, 2010) were also eliminated.…”

“…The question of the explanatory power of intrinsic equity valuation models to account for variations in equity share prices or returns has received considerable attention from numerous researchers of capital markets in the accounting, finance and economic fields over the past six decades. In recent years, the accounting-based Ohlson (1995) residual income valuation framework has been the primary econometric model of choice among researchers in this field, who have typically operationalised it in attempts to answer a wide range of research questions regarding the interconnections between intrinsic equity valuation models, their variables and the market value of equity shares or share price returns (see, e.g., Zheng, Wang, Song, Wu, & Zhai, 2020;Kuo, 2017;Leccadito & Veltri, 2015;Durán-Vázquez, Lorenzo-Valdés & Castillo-Ramírez, 2014;Qi, Wu & Xiang, 2000;Lee, Chen & Tsai, 2014;Lee, Lin, & Yu, 2013;Liu & Liu, 2010). Meanwhile, several variants of the Ohlson (1995) model have also emerged in recent years, the foremost of which range from decompositions of Ohlson's (1995) residual income variable into substitute accounting earnings variables, such as the traditional bottom-line earnings variable to those based on alternative earnings performance measures.…”

المنهجیة المتکاملة لتقدیر القیمة لـ James A. Ohlson رؤیة تحلیلیة من واقع البحوث التجریبیة: دراسة إنتقادیة.

“…One major exception is the modeling by . As one of the few attempts during the last ten years to develop a theory of accounting……F-O modeling is also one of the more controversial research area in accounting" (Beaver, 2002,P.457 (Lundholm, 1995;Dechow et al, 1998;Barth et al, 2001;Kothari, 2001 (Bernard, 1995;Myers, 1999;Dechow et al, 1999;Lo and Lys, 2000;Beaver, 2002 (Myers, 1999;Dechow et al, 1999;Barth et al, 1999;Canel and Morel, 2001;Choi et al, 2006;Leccaditor and Veltri, 2014) ‫مهؤل (Bernard,1995;Lo and Lys,2000;Pratt,2001 (Biddle and Choi,2006;Chambers et al, 2007;Kanagaretnan et al, 2009;Kubot et al,2009, Bradbury andCourtenary, 2018 (Dhaliwal et al, 1999;O'Hanlon andPope, 1999, Cahan et al, 2000;Isidro et al;2004;Goncharov and Hodgson, 2011 (Barth et al, 1999;Callen and Morel, 2001;Ota, 2002;Leccadito and Veltri, 2014 (Dechow et al, 1999;Myers, 1999 (Ritter and Warr, 2002;Gregory et al, 2005;Ashton et al, 2010 ‫ىظو"‬ ‫ل‬ " ‫يظ‬ ‫ظمظ‬ ‫مه‬ ‫ل‬ ‫ذهت‬ ‫لمه‬ ‫ن‬ ‫لعمظم‬ ‫هولت‬ (Bernard, 1995;Dechow et al, 1999;<...>…”