Abstract
The investments on capital market are more attractive nowadays considering the short-term potential earnings that this particular market can offer but also the opportunities generated by the new entry companies. The aim of the paper is to present different valuation models of share in order to identify/calculate a target price, on one hand, and to emphasize the impact of both internal and external information on price per share, on the other hand. The target price is an important instrument that drives, alongside with industry, financial, and risk analysis, the investment decision to buy, to hold, and to sell. The key issues in determining target price are equity analysis, cash flow forecasts, dividend forecast, peer valuation, and so on. But even if a fair/true target price of a given share according to valuation models was established, the external information (from the macroeconomic environment or related to the government policies) could have a huge impact on price per share and on investor decision to buy, to hold, or to sell.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
References
Bilinski, P., Lyssimachou, D., Walker, M.: Target price accuracy: international evidence. Account. Rev. 88(3), 825–851 (2012)
Billingsley, R.S.: Corporate financial decision making and equity analysis: an overview. In: AIMR Conference Proceedings. Association for Investment Management and Research, Vol. 1995, No. 4, pp. 1–4 (1995)
Boudoukh, J., Feldman, R., Kogan, S., Richardson, M.: Which news moves stock prices? A textual analysis (No. w18725). National Bureau of Economic Research (2013)
Bradshaw, M.T., Brown, L.D., Huang, K.: Do sell-side analysts exhibit differential target price forecasting ability? Rev. Acc. Stud. 18(4), 930–955 (2013)
Cheng, C.A., McNamara, R.: The valuation accuracy of the price-earnings and price-book benchmark valuation methods. Rev. Quant. Finan. Acc. 15(4), 349–370 (2000)
Cutler, D.M., Poterba, J.M., Summers, L.H.: What moves stock prices? J. Portf. Manag. 15(3), 4–12 (1989)
Da, Z., Hong, K.P., Lee, S.: What drives target price forecasts and their investment value? J. Bus. Finan. Acc. 43(3–4), 487–510 (2016)
Damodaran, A.: http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/Betas.html (2017). Accessed 25 Mar 2017
Demirakos, E.G., Strong, N.C., Walker, M.: Does valuation model choice affect target price accuracy? Eur. Account. Rev. 19(1), 35–72 (2010)
Gleason, C.A., Bruce Johnson, W., Li, H.: Valuation model use and the price target performance of sell-side equity analysts. Contemp. Account. Res. 30(1), 80–115 (2013)
Imam, S., Chan, J., Shah, S.Z.A.: Equity valuation models and target price accuracy in Europe: evidence from equity reports. Int. Rev. Financ. Anal. 28, 9–19 (2013)
Joos, P., Piotroski, J.D., Srinivasan, S.: Can analysts assess fundamental risk and valuation uncertainty? An empirical analysis of scenario-based value estimates. J. Financ. Econ. 121(3), 645–663 (2013)
Li, X., Xie, H., Chen, L., Wang, J., Deng, X.: News impact on stock price return via sentiment analysis. Knowl.-Based Syst. 69, 14–23 (2014)
Mukherjee, T.K., Kiymaz, H., Baker, H.K.: Merger motives and target valuation: a survey of evidence from CFOs. J. Appl. Finan. 14, 7–24 (2004)
Nikkinen, J., Sahlström, P.: Impact of scheduled US macroeconomic news on stock market uncertainty: a multinational. Perspective. (2015)
Ohlson, J.A.: Earnings, book values, and dividends in equity valuation. Contemp. Account. Res. 11(2), 661–687 (1995)
Parrino, R.: Choosing the right valuation approach. In: CFA Institute Conference Proceedings, Vol. 2005, No. 4, pp. 15–28. CFA Institute (2005)
Sharpe, W.F., Litterman, R.: Past, present, and future financial thinking. Financ. Anal. J. 70(6), 16–22 (2014)
Stowe, J., Robinson, Th., Pinto, J., McLeavey, D.: Equity Asset Valuation, CFA Institute, John Wiley & Sons, Inc., New Jersey, (2007)
Author information
Authors and Affiliations
Corresponding author
Editor information
Editors and Affiliations
Rights and permissions
Copyright information
© 2018 Springer International Publishing AG
About this paper
Cite this paper
Herciu, M. (2018). The Investment on Capital Market: From Target Price Valuation Models to Investor Final Decision. In: Mărginean, S., Ogrean, C., Orăștean, R. (eds) Emerging Issues in the Global Economy. Springer Proceedings in Business and Economics. Springer, Cham. https://doi.org/10.1007/978-3-319-71876-7_16
Download citation
DOI: https://doi.org/10.1007/978-3-319-71876-7_16
Published:
Publisher Name: Springer, Cham
Print ISBN: 978-3-319-71875-0
Online ISBN: 978-3-319-71876-7
eBook Packages: Economics and FinanceEconomics and Finance (R0)