The following four articles comprise the core of my research. In them, I revolutionize two of the four steps of a Discounted Cash Flow Approach to valuation (calculating discount rates and Discount for Lack of Marketability), with "Empirical Testing of Unified Valuation Theory" providing what is to my knowledge the first empirical test of the ability of any valuation theory to explain real world data*. Most readers can get a good feeling for the depth and breadth of the research from browsing even two or three of these articles.
The September 1994 article, "Discount For Lack of Marketability-A Theoretical Model," contains the first sophisticated economic model to calculate the magnitude of the discount for lack of marketability. (This research is updated in Chapter 7 of Quantitative Business Valuation.) Additionally, Chapter 9 of the book contains extensive statistical analysis of the Partnership Profiles database, a database of secondary limited partnership transactions. This direct empirical evidence is a very important source for objective analysis of valuation discounts in real estate limited partnerships. You can find this analysis in our sample fractional interest discount study that is actually Chapter 9 of my book. Please contact us to receive a sample fractional interest discount study.
"A Breakthrough In Calculating Reliable Discount Rates" contains the first accurate calculation of the Discount Rate and Price Earnings Multiples for privately held firms, making the process far more accurate and objective, yet less time-consuming and costly. This new method is demonstrably three times more accurate than the Capital Asset Pricing Model. The American Society of Appraisers invited me to lecture at its June 1996 International Conference in Toronto about this article. "Discount Rates as a Function of Log Size and Valuation Error Measurement" updates this article and explores the accuracy of valuation. The National Association of Certified Valuation Analysts invited me to speak at its conference in November 1998 about this research.
"Empirical Testing of Unified Valuation Theory" subjects the above articles to rigorous empirical testing, with the results confirming the earlier research. Even though all four of the above articles have been partially superseded by the research in Quantitative Business Valuation, they contain useful information and demonstrate a scientific approach to valuation.
* Quantitative Business Valuation revolutionizes the other two steps in the Discounted Cash Flow valuation. Chapter 2 explains how regression analysis can significantly improve forecasting sales, costs, and expenses, and how to use it in the Guideline Company Approach. The novel research in Chapter 7 develops a quantitative measure of control premiums by adapting Voting Rights Premia academic literature to the valuation of private businesses. Chapter 10 contains more extensive empirical testing of the ability of my models to explain real world data.
|Available File Downloads||Size|
|(March 1997) Discount Rates as a Function of Log Size and Valuation Error Measurement||112.93 KB|
|(Sept. 1994) Discount for Lack of Marketability--A Theoretical Model||62.77 KB|
|(August 1994) A Breakthrough in Calculating Reliable Discount Rates||73.66 KB|
|(1994) Empirical Testing of Unified Valuation Theory||41.37 KB|