<p>This thesis is concerned with exploring the equity market price discovery process, the translation and incorporation of new information into stock prices, by studying both what information is included in this process and which valuation methods are used to translate that information into a value.</p><p>The overarching research question posed in this thesis is: <i>How is equity valued?</i> The overarching question is broad and has been divided into the following sub questions:</p><p><i>What valuation methods do companies use when valuing takeover targets?</i></p><p><i>What valuation methods do sell-side analysts use when valuing equity?</i></p><p><i>What factors explain the variation in the use of valuation methods by sell-side analysts?</i></p><p><i>To what extent do sell-side analysts utilize non-financial information in their reports?</i></p><p>These questions are addressed in four separate essays. Findings of the thesis emphasized that valuation behavior is contextual to several specific circumstances. Findings showed that companies valuing takeover targets used sophisticated valuation methods to a higher extent than did sell-side analysts. Findings also showed systematic differences in the choice of valuation methods among sell-side analysts.</p><p>With regards to the use of non-financial information and information on Intellectual Capital this thesis showed that the context of the target firm dictates which information is relevant for predicting future performance, and hence is used by analysts. Additionally, the accessibility of information is an important factor affecting what information is used in the valuation process.</p><p>Understanding the valuation behavior of the different actors on the capital market is to understand the pricing process of the market, and as such the contribution of this thesis has been to shed more light on the cornerstone of market efficiency- the ability of market actors to identify and buy (sell) under priced (over priced) stocks.</p>

Thesis (M.S.) -- University of Tennessee, Knoxville, 2006. / Title from title page screen (viewed on Feb. 14, 2007). Thesis advisor: John W. Haas . Vita. Includes bibliographical references.

This thesis is concerned with exploring the equity market price discovery process, the translation and incorporation of new information into stock prices, by studying both what information is included in this process and which valuation methods are used to translate that information into a value. The overarching research question posed in this thesis is: How is equity valued? The overarching question is broad and has been divided into the following sub questions: What valuation methods do companies use when valuing takeover targets? What valuation methods do sell-side analysts use when valuing equity? What factors explain the variation in the use of valuation methods by sell-side analysts? To what extent do sell-side analysts utilize non-financial information in their reports? These questions are addressed in four separate essays. Findings of the thesis emphasized that valuation behavior is contextual to several specific circumstances. Findings showed that companies valuing takeover targets used sophisticated valuation methods to a higher extent than did sell-side analysts. Findings also showed systematic differences in the choice of valuation methods among sell-side analysts. With regards to the use of non-financial information and information on Intellectual Capital this thesis showed that the context of the target firm dictates which information is relevant for predicting future performance, and hence is used by analysts. Additionally, the accessibility of information is an important factor affecting what information is used in the valuation process. Understanding the valuation behavior of the different actors on the capital market is to understand the pricing process of the market, and as such the contribution of this thesis has been to shed more light on the cornerstone of market efficiency- the ability of market actors to identify and buy (sell) under priced (over priced) stocks.

Bakgrund: För att avgöra huruvida aktieanalytiker som grupp betraktat tillför värde för investerare måste frågan ställas om det är lönsamt att följa analytikernas konsensusrekommendationer. Ett problem med att följa dessa är att rekommendationerna som utgör konsensus kan förbli oförändrade under långa perioder vilket innebär att de vanligtvis blir mindre informativa med tiden. Studier som istället utvärderar värdet av reviderade rekommendationer har visat att det kan vara mer lönsamt att följa analytiker när de ändrar uppfattning om en aktie. Syfte: Syftet med studien är att utvärdera revideringar av aktieanalytikers rekommendationer på den nordiska marknaden och att analysera investeringsstrategier baserade på dessa som tar hänsyn till transaktionskostnaders inverkan på avkastningen. Genomförande: De reviderade rekommendationerna har utvärderats kvantitativt med data från Inquiry Financial för perioden 2006 – 2009. Vi konstruerar sex portföljer för varje studerad marknad, där de olika portföljerna består av upp- respektive nedgraderade aktier med olika innehavsperioder för att testa huruvida revideringarna kan sägas vara informativa. Resultat: Resultaten visar att reviderade rekommendationer är informativa på flera av de studerade marknaderna, där aktiekurser fortsätter att stiga för uppgraderingar och sjunka för nedgraderingar flera månader efter att revideringen har skett. En investerare som agerade på revideringarna hade kunnat generera överavkastning i ett flertal utvärderade strategier innan justering för transaktionskostnader skett. När hänsyn tagits till transaktionskostnadernas inverkan genererar ingen strategi signifikant alfa, men resultaten indikerar ändå att det finns ett värde i att följa revideringarna. / Background: To determine whether or not stock analysts as a group add value for investors the question that should be asked is if it’s profitable to follow the analysts' consensus recommendations. A problem with following these is that the recommendations that enter into the consensus can remain unchanged for long periods which mean that they generally become less informative over time. Studies that instead evaluate recommendation revisions have shown that it can be more profitable to follow the analysts when they change their opinions regarding a stock. Aim: The aim of this study is to evaluate analysts’ recommendation revisions in the Nordic markets and to analyze investment strategies based on these revisions that consider the impact of transaction costs. Completion: The recommendation revisions have been evaluated quantitatively using data from Inquiry Financial for the period 2006 – 2009. We construct six portfolios for each market, where the portfolios consist of up- and downgraded stocks with different holding periods in order to determine how informative the revisions are. Findings: We find that recommendation revisions are informative in several of the studied markets, where stock prices continue to drift upward for upgrades and downward for downgrades several months after the revision. An investor acting on these revisions would have been able to generate abnormal returns in a number of considered strategies, gross of transaction costs. When the impact of transaction costs is considered no strategy generates significant alpha due to the frequent rebalancing required, but the results nonetheless indicates that there is value in following the revisions.

Bakgrund: Det har i tidigare forskningar bevisats att privatpersoner har en tendens att vilja få hög avkastning på kort tid och därför väljer de ofta att investera i aktier. Detta leder till att aktierekommendationer har en stor påverkan på de privatpersoner som vill investera i aktier utan att ha en god kunskap inom ämnet. Det har även visats i olika undersökningar att privatpersoner i majoritet har lägre tillit för affärstidningar än för banker. Syfte: Syftet med denna undersökning är att undersöka banker och affärstidningarnas utfall av aktierekommendationer på den svenska aktiemarknaden. Genomförande: En kvantitativ undersökning genomfördes, där vi valde fyra olika banker och fyra olika affärstidningar. Tidsperioden var tre år, mellan 2010-01-01 och 2012-12-31. Totalt undersöktes 617 köp- och säljrekommendationer under fyra olika perioder; en dag, fem dagar, tio dagar och 30 dagar efter publiceringsdatumet. Resultat: Resultatet av undersökningen antyder på att det finns en skillnad mellan banker och affärstidningar gällande träffsäkerheten på dess publicerade aktierekommendationer. Affärstidningarna har högre antal träffar än bankerna, både när det gäller säljrekommendationer och köprekommendationer. / Background: It has been shown in previous researches that individuals have a tendency to want to get high returns in a short time and therefore often choose to invest in stocks. Stock recommendations have therefore a large impact on the individuals who want to invest in stocks without having good knowledge of the subject. It has also been shown in various studies that the majority of individuals have lower trust in business magazines than for banks. Purpose: The purpose of this study is to investigate the banks and the business magazines outcome of the stock recommendations of the Swedish stock market. Method: A quantitative study was conducted, in which we chose four different banks and four different business magazines. The time period was three years, between 2010-01-01 and 2012-12-31. A total of 617 stock recommendations were investigated during four different periods; one day, five days, ten days and 30 days after the date of publication. Conclusion: The study results indicate that there is a difference between banks and business magazines regarding the accuracy of the published stock recommendations. Business magazines have a higher number of hits than the banks, both in terms of sales recommendations and purchase recommendations.

Background: The interest in shares has increased over the years, despite several stock market crashes. One reason for this is the emergence of stock trading online,which makes it easier for individuals to trade in shares. However, there has been much criticism towards financial analyst with the lack of fundamental basis to support their recommendations. Objective: The purpose of this study is to examine the share valuation models swedish financial analysts today applies and consider appropriate. A comparison will also be carried out in previous studies, to see if the application of the modelsand their suitability has changed. Method: The study used a qualitative approach with deductive approach. Semistructured interviews were conducted and the basis for the study's primary data.The theories and previous studies obtained through secondary data. Results: Our results demonstrate that no single model applied, is appropriate. Therefore, the financial analyst combines the models. Financial analysts place great emphasis on the macro-economic aspects in the valuation of shares. Macroeconomic analyses underlying fundamental valuation models.

Information transparency enhances corporate governance. In an attempt to reduce the information asymmetry between business insiders and outsiders and to allow outsiders to have more information for decision making by disclosing more corporate information voluntarily, the Taiwan Stock Exchange Corporation (TSEC) and Over-The-Counter Securities Exchange (OTCE) requested the Securities & Futures Institute (SFI) to implement an information disclosure and evaluation system for all publicly traded and OTC companies listed in TSEC. This study investigates the effects of the system on decision behavior of the investors, analysts, and auditors. Empirical results indicate that investors¡¦ ability of future earnings evaluation increases, analysts¡¦ earnings forecasts are more accurate, and the earnings forecasts dispersion among the analysts decreases after the system has been implemented. However, the implementation of the system has no effects on the types of audit opinion issued by auditors. Besides, the analysts¡¦ earnings forecasts are more accurate for the ¡§more transparent¡¨ companies. However, the differences of future earnings evaluation, earnings forecasts dispersion among the analysts and types of audit opinion between ¡§more transparent¡¨ and ¡§less transparent¡¨ companies are not significant. These results may provide implication to authorities for making related policies.

Thesis (Ph.D.)--Mississippi State University. Department of Finance and Economics. / Title from title screen. Includes bibliographical references.

This dissertation investigates the immediate effects of securities analysts' statements on shareholders. Two of the most important questions posed in research on capital markets are when and how analysts matter. A time at which analysts might matter is when they make pronouncements regarding a firm or industry; ways in which they might matter is through their word choices and the context of their words in these pronouncements. The question, "Do analysts matter?," has been explored before and has been answered in terms of the securities analysts' quantitative earnings forecasts and their effects on the capital markets. I investigated the discourse used in these earnings forecasts and other statements regarding the focal firm or industry in analyst reports. Therefore, I answered the question, "Do analysts matter, as defined by their words used, and do they change investors' judgments about a firm's future prospects?" The study employed content analysis of analysts' language to determine whether the words they use in their statements cause a response in the market. The study also investigated how the analysts' language differs based on their affiliations. To examine this question, I drew on the efficient markets theory from finance. Data sources included the Chicago Centre for Research on Security Prices (CRSP) tapes and First Call analyst reports. The research applied quantitative computer text analysis, the event study methodology, and regression to test the hypotheses. By studying statements from the All-American Team analysts, the present work shows that investors do consider the pronouncement of analyst statements significant. The results demonstrate support for the idea that analyst statements have an impact on the stock market. Moreover, the statement characteristics have an incremental effect on the market response. The key findings illustrate that words in the analysts' report matter. The analyst characteristics were instrumental in deciding the words that the analysts use in their reports. Finally, analysts use words to signal information to investors when they are pressured from investment banking relationships. / text

The role of information is central to the study of corporate finance. In the real world where one party usually has more and better information, information asymmetry forms the basis of analysis in many key aspects of modern economics including contract theory and principle-agent problems. Although technology facilitates information flow, information continues to play an important role because we live in an environment in which there is more information and information that is more complex. Moreover, we are experiencing a fundamental shift towards a knowledge-based economy in which ideas and concepts, both in the form of information, gain importance. This thesis examines the role of information as we make this transition in two separate settings: First in a “real impact” setting where knowledge generated at leading research universities spills over into firms nearby, and second, in a "traditional market" setting where analysts help disseminate information. In the post-industrial economy of the 21st century, innovation is the engine of economic growth. As a result, we increasingly value human capital and knowledge. Chapter 2 looks at the location of firms relative to knowledge centers and its impact on stock volatility. I argue that knowledge spillovers foster firm R&D and find supporting evidence. My evidence is consistent with the classic models on the impact of human capital on economic growth (Nelson and Phelps, 1966). Chapter 3 examines the impact of knowledge and innovation on firms’ cash management policies. Bates, Kahle, and Stulz (2009) find that the average cash-to-assets ratio for firms more than doubles in the past decades and attribute it to changing firm characteristics. I identify innovation as a driving force behind these changes, resulting in firms holding more cash as a precaution. In Chapter 4, I study the investment value of information from analysts, or more specifically, analyst target prices. Due to potential conflicts of interest problems, the value that analysts provide to investors remains controversial. Moreover, since the information age is characterized by information overload, it is harder for investors to identify relevant information. I find that institutions trade in the same direction as the consensus target price movement. / Thesis (Ph.D, Management) -- Queen's University, 2012-03-07 14:20:20.178