An Optimal Peer Group Selection Strategy for Multiples-Based Modelling in the South African Equity Market

Nel Ws

Journal of Economics and Behavioral Studies, 2015, vol. 7, issue 3, 30-46

Abstract: Although peer group selection is a key consideration when performing multiples-based valuations, there is a lack of theoretical guidance on an optimal peer group selection strategy in emerging markets. Principal Component Analysis-based biplots and correlation monoplots are used to assess the valuation performance of multiples whose peer groups are based on either industry classification or valuation fundamentals. The evidence suggests that multiples whose peer groups are based on valuation fundamentals outperform multiples whose peer groups are based on industry classifications, with a combination of valuation fundamentals Rg and RoE emerging as the optimal peer group variable. The evidence suggests that an optimal choice of peer group variable could secure an increase in valuation precision of as much as 41.77%.

Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://ojs.amhinternational.com/index.php/jebs/article/view/580/580 (application/pdf)
https://ojs.amhinternational.com/index.php/jebs/article/view/580 (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:rnd:arjebs:v:7:y:2015:i:3:p:30-46

DOI: 10.22610/jebs.v7i3(J).580

Access Statistics for this article

More articles in Journal of Economics and Behavioral Studies from AMH International
Bibliographic data for series maintained by Muhammad Tayyab ().