Assessing Relative Valuation in Equity Markets: Bridging Research and Practice

By: Emanuele Rossi and Gianfranco Forte

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Synopsis: Thisbook addresses the gap between the widespread use of stock market multiples invaluation practice and the frontiers of research on multiples. The book's approachis twofold: the authors first analyse the performance of multiples metrics inpredicting the market price of a set of liquid and highly traded US stocks. Theauthors then employ these results to test profitable stock purchasingstrategies employed in order to 'beat the market'. The results presented widenour understanding of the "market performances" of the valuation tools practitionersutilise in their everyday work. The evidence is of interest to researchers and equity analysts, who wish to analyse the circumstances in whichvaluation errors using multiples are more frequent and when market multiplesbecome ineffective in estimating market prices.