An Accounting-Based Measure of Valuation Uncertainty

Key Points

• The research aims to develop a direct accounting-based measure of valuation uncertainty for estimating intrinsic equity values.
• Developed an accounting-based valuation model to estimate intrinsic equity values.
• Measured uncertainty by calculating the spread of these equity values.
• Analyzed price ranges in IPO prospectuses and M&A fairness opinions using the model.
• Applied the measure in an asset pricing context to explore value premium properties.
• The proposed measure captures both cash flow and discount rate uncertainty.
• It explains price ranges in initial public offering (IPO) prospectuses and merger & acquisition (M&A) fairness opinions.
• The measure shows potential in predicting various future outcomes related to uncertainty.

Abstract