Equity Valuation: Science, Art, or Craft?

The price at which a stock is traded in the market reflects the ability of the firm to generate cash flow and the risks associated with generating the expected future cash flows. 

The authors of this Research Foundation publication, Frank J. Fabozzi, CFA, Sergio M. Focardi, and Caroline Jonas point to the limits of widely used valuation techniques. The study also underlines problems with valuing IPOs and private equity: Both are sensitive to the timing of the offer, suffer from information asymmetry, and are more subject to behavioral elements than is the case for shares of listed firms.

Click to read the complete white paper on the site