CFA Institute

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.

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Head Office
EMEA Office
67 Lombard Street
7th Floor
London
EC3V 9LJ
United Kingdom
Contact
Sarah-Jane Purvis Tel. 020 7330 9559
Company website:
http://www.cfainstitute.org
Year Founded:
1947
No. of investment offices worldwide:
4

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  • equity valuation

    Equity Valuation: Science, Art, or Craft?

    White papersWed, 7 Feb 2018

    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 costs of overdiversification

    The Costs of Overdiversification

    White papersWed, 10 Jan 2018

    Institutional investors, charged with outperforming a policy benchmark, often allocate to external active managers in order to hit their return objective. The challenge is to do so without overdiversifying the plan. 

  • asian structured products

    Asian Structured Products

    White papersTue, 5 Dec 2017

    In this paper, the authors examine the nature of structured products, why they are used, and by whom.

  • inefficiencies in the pricing of exchange traded funds

    Inefficiencies in the Pricing of Exchange-Traded Funds (ETFs)

    White papersTue, 24 Oct 2017

    This 31-page paper appears in CFA Institute’s Financial Analysts Journal. It examines the topic of ETF pricing inefficiencies. Despite the arbitrage mechanism that allows authorized participants to create and redeem shares for the underlying portfolios, ETF prices can deviate significantly from the net asset values.

  • fin tech and reg tech

    FinTech and RegTech in a Nutshell, and the Future in a Sandbox

    White papersMon, 9 Oct 2017

    Interaction between finance and technology is not novel. The abacus is a testament to the long-standing relationship between the two. But the 2008 global financial crisis represented a pivotal moment that separated prior phases of the development of financial technology and regulatory technology from the current paradigm.

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