Modeling dividends, earnings, and book value equity: An empirical investigation of the ohlson valuation dynamics

Bar‐Yosef, Sasson; Callen, Jeffrey L.; Livnat, Joshua

doi:10.1007/bf00555372

Cited by 45 publications

(46 citation statements)

References 18 publications

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“…Findings of prior empirical research (for example, seeDechow et al 1999;Bar-Yosef et al 1995) are generally consistent with this assumption. This affects only seven observations, or less than 1 percent of the observations.…”

supporting

confidence: 59%

Unrecorded Intangible Assets: Abnormal Earnings and Valuation

Kohlbeck

Warfield

2007

Accounting Horizons

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SYNOPSIS:We use the unique banking industry setting to demonstrate the impact of unrecorded intangible assets on abnormal earnings and equity valuation in the context of the residual income valuation model. We show that the persistence of bank abnormal earnings and, consequently, the pricing multiples on bank abnormal earnings, vary with the level of unrecorded intangible assets. Our evidence suggests that unrecorded intangible assets are important in understanding the persistence and valuation of abnormal earnings in the banking industry. The analysis framework introduced in this paper could also be used to examine the valuation impacts of intangible assets in other industries.

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supporting

confidence: 59%

Unrecorded Intangible Assets: Abnormal Earnings and Valuation

Kohlbeck

Warfield

2007

Accounting Horizons

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“…For example, while the Ohlson (1995) model assumes that the persistence parameter, ω, follows an autoregressive process with one lag, DHS find that the second lag is statistically significant ( t = 7.50). Moreover, Bar‐Yosef, Callen and Livnat (1996) reject the one‐period lagged linear dynamic. Lastly, all of the studies that implement the Ohlson (1995) model yield negative abnormal earnings, on average (e.g.…”

Section: Literature Reviewmentioning

confidence: 98%

A UK Test of an Inflation‐Adjusted Ohlson Model

Gregory¹,

Saleh²,

Tucker³

2005

Business Fin & Account

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This paper conducts a UK test of a version of the Ohlson (1995) model. We should only expect abnormal earnings to revert to zero if the book value of assets is economically meaningful. In this paper we make use of the property revaluations common in UK accounts, but estimate other asset values and earnings in inflation-adjusted terms. This, we argue, gives rise to estimates of abnormal earnings that can reasonably be expected to revert to zero. We then test this modified model on UK data using the Dechow, Hutton and Sloan (1999) method. In line with the predictions of the Ohlson model, we find that these modified abnormal earnings appear to mean revert, and that a first order autoregressive process is sufficient to capture the persistence of UK real abnormal earnings. The modified abnormal earnings model in general predicts one year ahead earnings more successfully than an unmodified model. Furthermore, for much of the sample period, one year ahead predictions of abnormal earnings are better for the real model during periods of higher inflation. The undervaluation problem found in prior studies appears to be replaced with an overvaluation problem in the real model which is more acute during periods of high inflation. Last, we show that an estimate of the model based upon an industry level specification appears to perform no better than a market-wide specification of the model. Copyright Blackwell Publishers Ltd, 2005.

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“…2 2 More indirectly, Bar‐Yosef, Callen and Livnat (1996) and Morel (1999) evaluate the AR(1) lag structure of the Ohlson and Garman‐Ohlson (1980) framework. Ramakrishnan and Thomas (1992) test a number of Ohlson‐like models at the firm level but do not test the Ohlson (1995) model per se.…”

mentioning

confidence: 99%

“…Since it is impossible for the empiricist to specify the synthetic probabilities for risk adjustment in the numerator, we make the same ‘leap of faith’ as do all other empirical studies in this literature by assuming that risk is adjusted for in the denominator via the cost of capital. Otherwise, the Ohlson (1995) model and all of its variants–including Feltham and Ohlson (1995 and 1996)–are inherently non‐testable and, hence, non‐falsifiable.…”

mentioning

confidence: 99%

Endogenous Parameter Time Series Estimation of the Ohlson Model: Linear and Nonlinear Analyses

Morel

2003

Business Fin & Account

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This paper tests the empirical validity of the Ohlson (1995) model on a firm-level time series basis. The coefficients of the earnings dynamic and valuation equations are first estimated by OLS. Next, recognizing the nonlinear relationships among the parameters, each equation is estimated by nonlinear Least Squares. Lastly, the model is estimated as a restricted system by nonlinear Least Squares and nonlinear SUR. In all cases, parameters are endogenously estimated. Irrespective of the estimation method, the Ohlson model often yields inconsistent or insignificant parameter estimates. Nevertheless, point estimates of equity risk premia are similar to those obtained from alternative methodologies. Copyright Blackwell Publishers Ltd, 2003.

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Modeling dividends, earnings, and book value equity: An empirical investigation of the ohlson valuation dynamics

Cited by 45 publications

References 18 publications

Unrecorded Intangible Assets: Abnormal Earnings and Valuation

Unrecorded Intangible Assets: Abnormal Earnings and Valuation

A UK Test of an Inflation‐Adjusted Ohlson Model

Endogenous Parameter Time Series Estimation of the Ohlson Model: Linear and Nonlinear Analyses

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