Thesis (M.M. (Finance & Investment))--University of the Witwatersrand, Faculty of Commerce, Law and Management, Graduate School of Business Administration, 2015. / Researchers have suggested that emerging markets’ activity is driven largely by unlisted
companies. These companies are dynamic, and show a relatively equitable income distribution.
However, they operate under severe challenges which can be a deterrent to their success. In
spite of these difficulties, the companies form exceptional investment targets due to their
innovative abilities, ability to customize products and formulate business models that reduce
bottlenecks and input costs as well as take advantage of economies of scale and scope.
Important risk factors such as: political, currency, corporate governance and information risks,
amongst others, should be factored in during the valuation process of emerging market
companies. In this paper, several criteria are used to assess thirteen popular emerging market
valuation models’ ability to effectively incorporate these risks.
Based on the outcomes of the assessment a best fit model is selected. However, none of the
emerging market valuation models explicitly factor in irrationality of market participants. In order
to address this, the study focuses on seven behavioural approaches to valuation under the
assumption of investor rationality and managerial overconfidence and/or optimism, with a
purpose to select one to include in the above mentioned “best fit” emerging market valuation
models. Next, assessment mechanisms for adapting these two models for private company
valuation were flagged by discussing approaches currently used in academia and corporate
finance. Finally, possible means of combining the three objectives, and assessing the success
of doing so, as an area for further research, were recommended.
Key Words: emerging markets, valuation, risk premium, country risk, systematic risk,
unsystematic risk, private companies, managerial overconfidence, managerial optimism,
irrationality, efficient markets, capital asset pricing model
| Identifer | oai:union.ndltd.org:netd.ac.za/oai:union.ndltd.org:wits/oai:wiredspace.wits.ac.za:10539/18820 |
| Date | January 2015 |
| Creators | Mtsweni, Bonisile Krystle |
| Source Sets | South African National ETD Portal |
| Language | English |
| Detected Language | English |
| Type | Thesis |
| Format | application/pdf |
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