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875 words - 4 pages

Estimating Phi (φ), Gamma (γ) and Ohlson’s Weighting k

Lab Session Workshop Topic 9

This workshop, data and worksheets are
© Dr Ray McNamara and Dr Keith Duncan

Estimating Phi (φ), Gamma (γ) and Ohlson’s Weighting k

INTRODUCTION

The purpose of this exercise is to explore empirically the estimation of Phi (φ), Gamma (γ) and Ohlson’s weighting k. The three parameters are critical in applying the Ohson style valuation models. Part of the exercise you will develop a spreadsheet to perform your analysis. This template can then be added to your master analysis template as an “Estimation of Ohlson Model Parameters” module.

NOTE: This workshop ...view middle of the document...

First remove/exclude any missing data (i.e. sort the data or use IF statements to identify missing data and then delete these cases or shift them to another sheet). You might also like to remove outlier observations now – but we suggest you return to this step later and remove extreme values that will make graphs hard to interpret.

4. Sort by industry and exclude those firms in the financial sector (Banks Diversified Financials), mining sector (Materials) and service sector (low assets). You can return to include these later but they are likely to skew your analysis of general industrial companies.

5. The following sections will take you through some analysis to profile the data and then to perform a valuation on Coke using the recent as well as earlier data from other tutorials.
IMPORTANT – you will need to store your results for each step so that they are not linked to the underlying data, as you will be resorting this data throughout the tutorial and hence your graphs will change if linked.

3. Industry Medians

1. Eliminate PE ratios you think are not relevant. Compute the average and median PE and PB ratios for the marker. Compare this value to (1+rf)/rf. Obtain the latest rf from the reserve bank.
2. Resort your data by industry and years.
3. Compute the median PE, PB for each industry and year. You can then use this in your project and other analysis.

4. Remember the Ohlson Valuation Model

Use the following version of Ohlson’s model in the next step where γ is the median book...

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