An Empirical Test of the Feltham-Ohlson Valuation Model

Posted: 16 Jun 1998

See all articles by Anwer S. Ahmed

Anwer S. Ahmed

Texas A&M University - Mays Business School

Date Written: May 1996

Abstract

This paper attempts to provide empirical evidence on some of the cross-sectional implications of the Feltham-Ohlson [1995] valuation model. Overall, the evidence supports the idea that stock prices can be viewed as a combination of stock (i.e., book equity and operating assets) and flow (i.e., earnings) variables. However, (i) evidence on the role of book value of equity as articulated in the model is mixed and (ii) evidence on the positive relation between the weight on operating assets and the parameter relating operating assets to future abnormal earnings predicted by the model is weak.

JEL Classification: M41, G12

Suggested Citation

Ahmed, Anwer S., An Empirical Test of the Feltham-Ohlson Valuation Model (May 1996). Available at SSRN: https://ssrn.com/abstract=2644

Anwer S. Ahmed (Contact Author)

Texas A&M University - Mays Business School ( email )

430 Wehner
College Station, TX 77843-4353
United States

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