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http://ssrn.com/abstract=408320
 
 

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A Comparison of Residual Income and Comparable Firm Valuation of Initial Public Offerings


Asher Curtis


University of Washington

Neil L. Fargher


Australian National University (ANU)

March 1, 2003


Abstract:     
This study contributes to the body of research that examines the valuation of initial public offers (IPOs). The aim of this study is to assess the relative predictive ability of residual income valuation against the popular alternative of comparable firm valuation for predicting the offer prices of IPO firms. The results show that the residual income model outperforms a number of comparable firm multiples in predicting the offer price. The results suggest that fundamental valuation is a valuable tool in the IPO context for investors even when there is limited data available for estimating these models.

Number of Pages in PDF File: 28

Keywords: residual income, comparable firm valuation, initial public offerings

JEL Classification: G12, G24, M41

working papers series


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Date posted: July 16, 2003 ; Last revised: August 29, 2013

Suggested Citation

Curtis, Asher and Fargher, Neil L., A Comparison of Residual Income and Comparable Firm Valuation of Initial Public Offerings (March 1, 2003). Available at SSRN: http://ssrn.com/abstract=408320 or http://dx.doi.org/10.2139/ssrn.408320

Contact Information

Asher Curtis (Contact Author)
University of Washington ( email )
NE Colombia Rd.
Seattle, WA 98195
United States
Neil L. Fargher
Australian National University (ANU) ( email )
Canberra, Australian Capital Territory 2601
Australia
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