An emerging market perspective on peer group selection based on valuation fundamentals

The developed market literature suggests that peer group selection based on a careful selection of valuation fundamentals may improve the valuation accuracy of multiples. However, the literature does not offer an emerging market perspective in this regard. In this article the valuation performances...

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Bibliographic Details
Published in:Applied financial economics 2014, Vol.24 (9), p.621-637
Main Authors: Nel, Soon, Bruwer, Wilna, le Roux, Niel
Format: Article
Language:English
Subjects:
Emerging markets
equity multiples
Individuals
JSE
Literature
Market
peer group selection
Peer groups
Peers
Selection
South Africa
Stock exchange
Stock exchanges
Studies
Valuation
valuation accuracy
valuation fundamentals
Valuation methods
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Summary:The developed market literature suggests that peer group selection based on a careful selection of valuation fundamentals may improve the valuation accuracy of multiples. However, the literature does not offer an emerging market perspective in this regard. In this article the valuation performances of 16 equity multiples are investigated, based on three individual valuation fundamentals and three different combinations of these valuation fundamentals. The valuation performance of these 16 multiples is assessed in the equity valuation of South African companies listed on the JSE Securities Exchange over the period 2001 to 2010. The empirical results revealed, among other findings, that peer group selection based on a careful selection of valuation fundamentals could, on average, increase valuation accuracy of multiples by as much as 37.88%.
ISSN:0960-3107
1466-4305
DOI:10.1080/09603107.2014.894629