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All Journal BISNIS & BIROKRASI: Jurnal Ilmu Administrasi dan Organisasi
Lau, Mudita
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Economics, Econometrics & Finance Social Sciences

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A Composite Multiple-based Stock Valuation Model Lau, Mudita; Widyarini, Maria; Faisal, Achmad
BISNIS & BIROKRASI: Jurnal Ilmu Administrasi dan Organisasi Vol. 32, No. 2
Publisher : UI Scholars Hub

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Abstract

This study seeks to examine whether a composite valuation model (made of several multiples) can outperform a single-multiple valuation model in valuation accuracy. This study applied a trial-and-error iteration using scripts written in R studio to optimize the weight of each multiple in each composite, aiming to reach a minimum valuation error for each composite valuation model. Based on financial data of 2009-2019, a composite valuation model performs better than a single-multiple valuation model in assessing all peer groups, achieving up to 18% greater accuracy, which is a significant improvement. The result suggests that a composite valuation model generally offers superior valuation accuracy. Academics and institutional investors searching for improved valuation accuracy may consider a composite valuation model as an alternative method. This study adds empirical evidence to the current knowledge on multiple-based valuation models, highlighting the potential advantages of a composite valuation model over a single-multiple model.
Co-Authors Achmad Faisal, Achmad