Proceedings of 7th Annual American Business Research Conference
23 - 24 July 2015, Sheraton LaGuardia East Hotel, New York, USA, ISBN: 978-1-922069-79-5
WS Nel and NJ le Roux
This study tested the relative valuation performance of multi-factor valuation models in the South African equity market. The findings confirmed that multi-factor models produced valuations that were more accurate than those of single-factor valuation models for the period between 2001 and 2010. In addition, the superior valuation performance of multi-factor valuation models over single-factor valuation models remained consistent over this time period.
The proper construction of multi-factor valuation models was investigated via the use of various statistical and mathematical methods. The research results indicated that multi-factor valuation models produced substantially more accurate valuations than single-factor valuation models for the period between 2001 and 2010. The evidence therefore suggests that multi-factor valuation models may offer substantial gains in valuation performance over single-factor valuation models. In light of the fact that investment practitioners’ reports typically contain numerous multiples, it seems sensible to consider the inclusion of multi-factor valuation models in these reports.
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Dr. WS Nel, School of Accountancy, University of Stellenbosch, Private Bag X1, Matieland
Prof NJ le Roux, Department of Statistics and Actuarial Science, University of Stellenbosch, Private
Bag X1, Matieland, E-mail: snel@sun.ac.za