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All Journal International Journal of Accounting, Management, Economics and Social Sciences (IJAMESC)
Wil Martens
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Humanities Economics, Econometrics & Finance Education Law, Crime, Criminology & Criminal Justice Social Sciences

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ASSESSING VALUATION MODEL FORECASTING ACCURACY IN HEALTHCARE: A SIMULATED COMPARISON OF CAPM AND DDM Wil Martens
International Journal of Accounting, Management, Economics and Social Sciences (IJAMESC) Vol. 3 No. 5 (2025): October
Publisher : ZILLZELL MEDIA PRIMA

Show Abstract | Download Original | Original Source | Check in Google Scholar | DOI: 10.61990/ijamesc.v3i5.562

Abstract

This study addresses the challenges of valuing firms in the volatile healthcare sector by rigorously comparing the fore- casting accuracy of the Capital Asset Pricing Model (CAPM) and the Dividend Discount Model (DDM). Employing a controlled synthetic dataset of 100 healthcare firms spanning 2019–2021, we aim to isolate model performance, free from real-world confounding factors. Forecast accuracy is measured using Mean Absolute Error (MAE) and Percent- age Absolute Error (PAE). Results indicate CAPM significantly outperforms DDM (e.g., CAPM’s average PAE of 3.47% vs. DDM’s 8.48%), particularly due to healthcare’s variable dividend policies. This research provides empirical evidence from a controlled setting on model suitability, guiding financial practitioners toward more reliable valuation techniques and contributing to the literature on model selection in sector-specific financial contexts.
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