MEASURING MARKET EFFICIENCY THROUGH VALUATION TECHNIQUES: THE CASE OF VISEGRAD COUNTRIES STOCK MARKETS

Artor Nuhiu, Florin Aliu, Fisnik Aliu and Arbër Hoti
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Artor Nuhiu: University of Prishtina, Kosovo
Florin Aliu: Institute of Technology and Business, Czech Republic
Fisnik Aliu: University for Business and Technology, Kosovo
Arbër Hoti: University of Prishtina, Kosovo

Studies in Business and Economics, 2023, vol. 18, issue 1, 198-217

Abstract: Company valuation stands as the most controversial topic in the field of financial management. The study investigates the extent to which stock prices of the companies listed on Czech, Polish, Hungarian, and Slovak equity markets deviate from their estimated intrinsic value. DCF model was employed using Monte Carlo simulations with 500, 1000, and 10000 trials to generate estimated intrinsic value and compare them to market prices. The results of the study show that the Bratislava Stock Exchange (SAX) on average holds the lowest gap between intrinsic value per share and market prices with only 82% deviation, followed by PSE with 116% deviation, WIG20 with 207% deviation, and BUX with 246%. SAX appears with the best performance from 2009 to 2019, where the shares on average were traded with only 82% deviation from their estimated equilibrium price (intrinsic value). Findings regarding the differences between book value per share and stock prices are different, where SAX leads with 71% deviation, WIG20 with 181%, PSE with 188%, and BUX with 545%. Outcomes of the work are of interest to financial investors that seek to diversify their portfolios on the equity stocks. The study offers a new conceptual framework for testing the market efficiency of equity exchanges through company valuations techniques. From the policy perspective, institutions in charge get inform on the measures to be taken that would improve efficiency and strengthen the importance of the Visegrad equity markets.

Keywords: Market Efficiency; Visegrad Countries; Stock Markets; Intrinsic Value; Estimated Equilibrium (search for similar items in EconPapers)
Date: 2023
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