Log-Linear Stock Valuation Based on Accounting Information

Thompson, Rex; Beatty, Randolph P.; Riffe, Susan

doi:10.2139/ssrn.311079

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Log-Linear Stock Valuation Based on Accounting Information

29 Pages Posted: 27 May 2002

See all articles by Rex Thompson

Randolph P. Beatty

University of Southern California - Leventhal School of Accounting

Susan Riffe

Southern Methodist University (SMU) - Accounting Department

Date Written: October 2001

Abstract

In this paper we provide an economic and econometric justification for using a log-linear form to estimate stock value based on accounting information. A log-linear form stands in contrast to the more traditional linear form. We state conditions under which log linear regression provides minimum variance unbiased estimates of log value as well as the appropriate transformation that yields the minimum variance unbiased estimate of value. Specification tests are suggested to infer conformity of the data to model assumptions and these are applied to a recent sample of public companies.

Suggested Citation: Suggested Citation

Thompson, Rex W. and Beatty, Randolph P. and Riffe, Susan, Log-Linear Stock Valuation Based on Accounting Information (October 2001). Available at SSRN: https://ssrn.com/abstract=311079 or http://dx.doi.org/10.2139/ssrn.311079