Econometrics of Fair Values

Posted: 23 Mar 2010

See all articles by Shyam Sunder

Shyam Sunder

Yale University - School of Management; Yale University - Cowles Foundation

Date Written: March 1, 2007

Abstract

The properties of many important valuation rules can be quantified, examined, and compared in a unified framework to assist policy decisions. Valuation rules can be viewed as econometric estimators of unobserved values of aggregates. Which valuation rule has minimum mean squared error (relative to the unobserved value of bundles of resources) is a matter of econometrics, not of theory or principle; it depends in a known fashion on the relative magnitudes of the parameters - price volatility and measurement errors - of the economy, industry, or firm. In general, no valuation rule, fair or not, dominates the others. Given the parameters of an environment, this framework can help identify efficient valuation rules.

Keywords: Fair value, mark-to-market, valuation rules, econometrics

JEL Classification: M41, M44, G12

Suggested Citation

Sunder, Shyam, Econometrics of Fair Values (March 1, 2007). Accounting Horizons, Vol. 22, No. 1, 2008. Available at SSRN: https://ssrn.com/abstract=1571424

Shyam Sunder (Contact Author)

Yale University - School of Management ( email )

165 Whitney Avenue
P.O. Box 208200
New Haven, CT 06520-8200
United States
203-432-6160 (Phone)

HOME PAGE: http://www.som.yale.edu/faculty/sunder/

Yale University - Cowles Foundation

Box 208281
New Haven, CT 06520-8281
United States

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