Valuation Methodology from the Perspective of Different Investor Types

Poul Lykkesfeldt () and Laurits Louis Kjaergaard ()

Chapter Chapter 6 in Investor Relations and ESG Reporting in a Regulatory Perspective, 2022, pp 37-41 from Springer

Abstract: Abstract Different types of investors apply several different valuation methods. Typically, the more established an investor is, the more dedicated resources, time, skills and efforts they apply to understand in detail the companies in their portfolio and target investments. This chapter studies typical institutional investor and bottom-up investing as opposed to the typical retail investor who often applies the top-down methodology. We explore the two main types of investor groups for equities, institutional investors and retail investors. Any company should strive for a balanced investor base to achieve the lowest possible risk premium because investors have different risk profiles, investment mandates and wish lists to determine which companies to invest in. Different investor types have different investment strategies. Institutional investors are dictated in the investment mandate stipulated in the public prospectus typically offered to their existing and potential investors. Retail investors are more flexible and can apply a combination of the strategies depending on the market opportunities that they find. We believe that investment strategies are likely the most researched in finance; therefore, we also highlight the most significant types.

Keywords: Institutional investors; Retail investors; Risk profiles; Absolute return; Relating return; Cash distribution; Social media (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1007/978-3-031-05800-4_6

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