Aaltodoc publication archive (Aalto University institutional repository)
School of Business | Department of Accounting | Accounting | 2016
Thesis number: 14737
Simulated firm valuation - Monte Carlo simulation applied to the Ohlson (1995) model: Case KONE Corporation
|Title:||Simulated firm valuation - Monte Carlo simulation applied to the Ohlson (1995) model: Case KONE Corporation|
|Year:||2016 Language: eng|
|Department:||Department of Accounting|
|Index terms:||laskentatoimi; lisäarvo; mallit; simulointi; pääoma; tilinpäätös|
» hse_ethesis_14737.pdf size:3 MB (3110087)
|Key terms:||Residual income valuation; Monte Carlo simulation; equity valuation; the Ohlson (1995) model; value relevance of accounting numbers; financial statement analysis; scenario and sensitivity analysis; Ohlsonin (1995) lisäarvomalli; Monte Carlo simulaatio; om|
Objectives of the study
The objective of the thesis is to study whether applying Monte Carlo simulation to the famous and ground-breaking Ohlson (1995) model generates accurate and plausible market values of equity capital in relation to the actual closing stock prices. Additionally, the study examines the additional value the simulated Ohlson (1995) model provides investors with if any.
The study is conducted as a case study, in which the expected stock prices generated by the simulated Ohlson (1995) model are compared with the actual closing prices of KONE Corporation's class B share at the publishing dates of the company's financial statements in 2007-2015. Additionally, the study includes a preliminary and supplementary regression analysis, the purpose of which is to examine the value relevance of the key variables of the Ohlson (1995) model - earnings and book value of equity.
The results of the conducted regression analysis include a preliminary indication that the expected stock price generated by the simulated Ohlson (1995) model is going to be substantially higher than the actual closing price for the FY2008. Apart from the FY2008 and FY2009, the simulated Ohlson (1995) model generated plausible, consistent and suggestive expected stock prices, but the additional value created by the constructed valuation model is founded on the results' visualization and investor discretion.
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