Mohammad Amri-Asrami; Mohammad-Ali Aghaei
Volume 21, Issue 1 , May 2017, , Pages 29-63
Abstract
Industrial groups have interactions within and outside groups. In this paper, twelve industrial groups of companies listed in Tehran Stock Exchange are reviewed in order to evaluate linear information dynamics. Conservatism measures of “ratio of sum of price to sum of book value” and “mean ...
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Industrial groups have interactions within and outside groups. In this paper, twelve industrial groups of companies listed in Tehran Stock Exchange are reviewed in order to evaluate linear information dynamics. Conservatism measures of “ratio of sum of price to sum of book value” and “mean of price-to-book ratio” are considered. In sample periods, in order to remedy the effects of special factors in sample industries, later ratio is de-trended. For controlling effects of each industry, inflation, and some other factors on the various industry indices, two measures of “average annual difference between price and book value” and “each industry index” are considered. Industry analysis shows that "sum of price to sum of book value" criterion has a significant correlation with the average of market value to book value and the correlation would be stronger if using the de-trended criteriun.
Finally, comparing scaled variables on the average annual difference between price and book value, it concluded that scaled variables based on the index of each industry led to a much stronger coefficient of valuation models.
Therefore, for assessment and analysis of linear information dynamics in industrial groups (including environmental factors such as conservatism in accounting policies, industry, stock market indices, cost of capital rate, inflation, the policy of dividend distribution, past and present of book value and securities) can be used for developing residual income valuation models.
