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Int. J. Financial Stud. 2015, 3(2), 162-176; doi:10.3390/ijfs3020162

An Improved Valuation Model for Technology Companies

The Institute of International Studies, Ramkhamhaeng University, Bangkok 10240, Thailand
Academic Editor: Nicholas Apergis
Received: 4 April 2015 / Revised: 19 May 2015 / Accepted: 20 May 2015 / Published: 1 June 2015
View Full-Text   |   Download PDF [367 KB, uploaded 1 June 2015]

Abstract

This paper estimates some of the parameters of the Schwartz and Moon (2001)) model using cross-sectional data. Stochastic costs, future financing, capital expenditures and depreciation are taken into account. Some special conditions are also set: the speed of adjustment parameters are equal; the implied half-life of the sales growth process is linked to analyst forecasts; and the risk-adjustment parameter is inferred from the company’s observed stock price beta. The model is illustrated in the valuation of Google, Amazon, eBay, Facebook and Yahoo. The improved model is far superior to the Schwartz and Moon (2001) model. View Full-Text
Keywords: valuation; cross-sectional data; stochastic costs; speed of adjustment; implied half-life; risk-adjustment parameter valuation; cross-sectional data; stochastic costs; speed of adjustment; implied half-life; risk-adjustment parameter
This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. (CC BY 4.0).

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Doffou, A. An Improved Valuation Model for Technology Companies. Int. J. Financial Stud. 2015, 3, 162-176.

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