{"title":"Private Market Equity Prices and Transactions Costs: Generalized IPCPL Theory and Private Market Empirical Tests","authors":"David H Goodman, Malcolm J. McLelland","doi":"10.5791/BVR-D-17-00015.1","DOIUrl":"https://doi.org/10.5791/BVR-D-17-00015.1","url":null,"abstract":"Implied private company pricing line (IPCPL) theory is based on the fundamental assumption—taken from modern asset pricing theory—that two or more equity interests that have the same risk exposures...","PeriodicalId":138737,"journal":{"name":"Business Valuation Review","volume":"44 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-12-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"124170116","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"The Impact of Size and Leverage on Equity Volatility","authors":"James K. Herr","doi":"10.5791/BVR-D-18-00003.1","DOIUrl":"https://doi.org/10.5791/BVR-D-18-00003.1","url":null,"abstract":"Many valuation practitioners rely on equity volatilities when performing equity allocations, derivative valuations, discounts for lack of marketability, or contingent consideration analyses. Yet in contrast to other commonly accepted valuation adjustments,1 practitioners still appear hesitant to adjust historical or implied volatilities from publicly traded comparables for differences in size when performing these types of analyses, despite theory that these factors should impact equity volatility.2 Instead, preference is usually made in the industry to adjust equity volatilities for leverage alone. In this paper I provide analytical support across a twenty-year time horizon using a five-year lookback period to examine the empirical impact of size and leverage on equity volatilities. I find that size has substantial impact on equity volatilities and provide suggested volatility size adjustments for equity volatility. Further, I find evidence that while leverage does have an impact on equity volatilities, ...","PeriodicalId":138737,"journal":{"name":"Business Valuation Review","volume":"133 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"123292486","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"From the Chair","authors":"Jeffrey S. Tarbell","doi":"10.5791/0882-2875-37.3.122","DOIUrl":"https://doi.org/10.5791/0882-2875-37.3.122","url":null,"abstract":"","PeriodicalId":138737,"journal":{"name":"Business Valuation Review","volume":"2 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"124869760","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Vincent Covrig, Daniel L. Mcconaughy, M. K. Travers
{"title":"Size-adjusting Volatility","authors":"Vincent Covrig, Daniel L. Mcconaughy, M. K. Travers","doi":"10.5791/BVR-D-18-0008.1","DOIUrl":"https://doi.org/10.5791/BVR-D-18-0008.1","url":null,"abstract":"Since the valuation of corporate securities with option-like features issued by the private companies requires an estimate of volatility based upon comparable public companies and the comparable companies are often larger, the use of unadjusted volatilities may understate the volatility of the subject private company. This article provides an up-to-date research review on the need for size-adjusting volatility. We also present a simple methodology to size adjust comparable companies that is easily updated with data contemporaneous to the valuation date.","PeriodicalId":138737,"journal":{"name":"Business Valuation Review","volume":"63 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"127615623","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"The Absence of a Size Effect Relevant to the Cost of Equity","authors":"Clifford S. Ang","doi":"10.5791/BVR-D-17-00013.1","DOIUrl":"https://doi.org/10.5791/BVR-D-17-00013.1","url":null,"abstract":"In this paper, I evaluate whether there is a size effect that is relevant to the cost of equity. I first analyze what model investors use to determine the required rate of return on their investment and find investors prefer the Capital Asset Pricing Model (CAPM) over other models, even those that include a size proxy. I also show that over the period 1981 to 2016, small stocks underperformed large stocks, which is inconsistent with the existence of a size effect. Finally, I conclude that size effect studies have not been able to surmount the criticisms that the size effect lacks a theoretical basis and that the results of size effect studies are susceptible to data mining criticisms. Given these results, practitioners should reconsider the standard practice of augmenting their cost of equity with a size premium.","PeriodicalId":138737,"journal":{"name":"Business Valuation Review","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"129035709","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Suggested Quality-Assurance Practices for Monte Carlo Analysis of a Geometric Brownian Motion Process","authors":"A. Newman","doi":"10.5791/BVR-D-17-00021R1.1","DOIUrl":"https://doi.org/10.5791/BVR-D-17-00021R1.1","url":null,"abstract":"This article suggests certain procedures that a valuation specialist can perform to test the results of a Monte Carlo analysis of a geometric Brownian motion process. First, this paper describes th...","PeriodicalId":138737,"journal":{"name":"Business Valuation Review","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"130015264","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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