Multiples Valuation and Abnormal Returns
Abstract
I investigate whether three commonly used valuation multiples—the Price-to-Earnings
Ratio, the EV-to-EBITDA multiple, and the EV-to-Sales multiple—can be used to identify
mispriced securities. I find that multiples are successful in identifying mispricing
in both the equal and value weighted portfolios relative to the One-Factor CAPM. I
further find, after controlling for size and value effects, that the bulk of the abnormal
returns are concentrated in smaller firms. Moreover, the Sales multiple seems to outperform
the other two multiples in the equal weighted design. In the value weighted design,
however, the P/E ratio outperforms the others.
Type
Honors thesisDepartment
EconomicsPermalink
https://hdl.handle.net/10161/9589Citation
Yoon, Jun (2015). Multiples Valuation and Abnormal Returns. Honors thesis, Duke University. Retrieved from https://hdl.handle.net/10161/9589.Collections
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