Multiples and Their Valuation Accuracy in European Equity Markets

34 Pages Posted: 18 Jan 2007

See all articles by Andreas Schreiner

Andreas Schreiner

Deutsche Bank AG

Klaus Spremann

University of St. Gallen; University of St. Gallen - School of Finance

Date Written: August 13, 2007


In spite of their widespread use in practice, accounting-based market multiples are subject of surprisingly few academic studies. As a contribution to close this gap, we examine the accuracy of different types of multiples in European equity markets. We find that multiples generally approximate market values reasonably well. In terms of relative accuracy, our results show: (1) Equity value multiples outperform entity value multiples. (2) Knowledge-related multiples are more accurate than traditional multiples. (3) Forward-looking multiples, in particular the two-year forward-looking price to earnings (P/E) multiple, outperform trailing multiples. These empirical findings are significant in magnitude, robust to the use of different performance measures, and constant over time. In an out-of-sample test using a U.S. dataset, our results for European data are confirmed. This supports the relevance of our findings for practical purposes.

Keywords: Finance and Accounting, Equity Valuation, Multiples

JEL Classification: G15, G24, M41

Suggested Citation

Schreiner, Andreas and Spremann, Klaus, Multiples and Their Valuation Accuracy in European Equity Markets (August 13, 2007). Available at SSRN: or

Andreas Schreiner (Contact Author)

Deutsche Bank AG ( email )


Klaus Spremann

University of St. Gallen ( email )

Varnbuelstr. 14
Saint Gallen, St. Gallen CH-9000

University of St. Gallen - School of Finance ( email )

Unterer Graben 21
St.Gallen, CH-9000

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