The relationship between stock price, book value and residual income: A panel error correction approach
Independent thesis Basic level (degree of Bachelor), 10 credits / 15 HE creditsStudent thesis
In this paper we examine the short and long-term relations between stock price, book value and residual income. We employ a panel error correction model, estimated with Engle & Granger’s (1987) two-step procedure and the single equation methodology. The models are estimated with FE-OLS and the MG-estimator. We find that stock prices adjust previous periods equilibrium error. Further, we find that book value has short and long-term effects on stock prices. Finally, this paper finds mixed results regarding residual incomes impact on stock prices. The MG-estimator finds evidence for a short-term relationship, while the FE-OLS provides insignificant or weak support for short-term effects. FE-OLS and MG-estimator find insignificant or weak support regarding residual incomes long-term effects.
Place, publisher, year, edition, pages
2015. , 5 p.
Accounting based valuation, stock valuation, residual income, Ohlson’s model, PECM, Cointegration, Panel unit root, Stock price, book value, dividends, dividend discount model
aktier, utdelningar, residual inkomst, aktie värderingar, Ohlson's model
Economics and Business
IdentifiersURN: urn:nbn:se:uu:diva-254344OAI: oai:DiVA.org:uu-254344DiVA: diva2:817913
Subject / course
Johan, Lyhagen, professor