Abstract

This study investigates whether DCF(Discounted Cash Flow Method), AEM (Abnormal Earnings Valuation Method), PFM (Proxy Firm Valuation Method) and MSM (Market Strength Method), which were revised to easily apply in business practice, are appropriate as valuation methods for listed stocks and also examines whether they can achieve high abnormal returns, resulting from the high practical applicability as valuation methods for listed stocks In order to verify those points, this research analyzed the prediction error and the absolute prediction error of the sample, which is composed of the 3,467 listed companies, setting up the period of 3 years from 2005 to 2007 at the same time, I figured out the abnormal returns of the investment. The results of the analysis are the following. First, I proved that AEM, PFM, and MSM could calculate estimated stock prices closer to real stock prices than that of DCF. Second, it turned out that the abnormal returns of the companies selected by valuation methods for listed stocks are significantly higher than those of the other case, and that the result has a long－term effect. Third, the portion turned out to be over 65% if the abnormal returns of the companies for investment are the positive on the other hand, the portion of the companies for none－investment is less than 50%. Fourth, even in the case that abnormal returns are the negative, it proved that the abnormal returns are higher in the companies for investment than those of non－investment. The contributions of this study are the following. I suggested some valuation methods for listed stocks to enhance the applicability of business practice by using account information, and consolidated some foundations for value investment by showing that high abnormal returns can be attained through the suggested methods.

Keywords

• DCF
• AEM
• PFM
• MSM
• valuation methods for listed stocks

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