University Press. [Chapter
2.]
Haslett (1997) On the sample variogram and the sample autocovariance for non-stationary time series, The
Statistician 46, 475-485.
DATA SOURCE: DataStream, Ecowin
MEASURING DEPENDENCE BEWTEEN VARIABLES: BEYOND CORRELATION
ISSUES:
Correlations are often quoted, but they only measures linear dependence. What if the relationship between
the variables is nonlinear? (For example, if x is symmetrically distributed, the correlation between x and its
square is zero even though they are exactly related by definition.) Copulas are functions that translate marginal distributions into the joint distribution. This project can explore their analytical properties, or use
them to model the empirical dependence between some financial variables.
SELECTED READING:
Cherubini, Luciano, Vecchiato (2004) Copula Methods in Finance. John Wiley & Sons. [Chapters 1-3.]
DATA SOURCE: DataStream, Ecowin
EQUITY VALUATION USING FORECASTED EARNINGS
ISSUES:
The focus of equity share valuation has changed from wealth distribution to wealth creation, i.e., from
dividend discounted model to earnings based valuation model in recent years. Financial analysts forecasted
earnings and book value equity play a key role in this approach. How英语论文网 【http://www.51lunwen.org】 to incorporate growth and accounting
policy as well as non-financial statement information become important and interesting issues.
SELECTED READING:
Dechow, Hutton and Sloan (1998), “An Empirical Assessment of the Residual Income Valuation Model”,
Journal of Accounting and Economics, 26:1-34.
Callen J., and D. Segal (2005) “Empirical Tests of the Feltham and Ohlson Model”, Review of Accounting
Studies, 10: 409-429.
Myers, J. (1999). Implementing Residual Income Valuation with Linear Information Dynamics”, The
Accounting Review, 74: 1-28.
Francis, J. P. Olsson and D. Oswald (2000), “Comparing the Accuracy and Explainability of Dividend, Free
Cash Flow and Abnormal Earnings Equity Value Estimates”, Journal of Accounting Research, 38: 45-70.
DATA SOURCE: DataStream, Compustat, I/B/E/S
IMPLIED COST OF CAPITAL
ISSUES:
Expected cost of capital can be estimated by an equilibrium model and multi-factor model by choosing
proxies for risk factors. Recent literature on the cost of equity capital uses the residual income valuation or
Ohlson model combined with analysts’ forecasts to estimate implied cost of equity capital. This approach can
be combined with multi-factor model. Since equity valuation and earnings information dynamics are
articulated, forecasted earnings and non-financial information can be import
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