The impacts of business cycles on the residual income valuation model: Empirical results from Taiwan stock markets

This research offers an additional asset pricing valuation viewpoint that combines theory with practice, enabling investors and fundamental analysts to either establish or adjust their portfolios if there is a trend to reverse the current economic atmosphere affected by financial and economic uncertainty (Liu & Chu, 2024). It presents a mixed model based on the residual income valuation (RIV) framework of Ohlson (1995), incorporating two new factors: business cycles and financial items. The former helps valuation models predict stock prices (Bolten & Weigand, 1998), while the latter is useful at stock pricing models (Huang & Zhang, 2012). We find that both business cycles and disaggregated financial components significantly influence stock valuation, and that the impact of accounting items in financial reports varies across different business cycles.