Multiple Regresion for Market Capitalization
Multiple Regression Model for
Market Capitalisation
Duvan Lopez (Victoria University) Yen Nguyen (Victoria University) Meutia Iqbal (Victoria University)
Bayu Suropati (Victoria University)
ABSTRACT
Over the years, the importance of market capitalisation has been well acknowledged to value a certain company for its shareholders, future acquirers, and generally anyone related with the company. There are various methodologies that have been used to analyse market capitalisation, such as cash flow based analysis, real options and regression analysis. In this study, we used multiple regression analysis to determine which of the numerous important factors yield the best model for market capitalisation as the multiples approach to company valuation. The aim of this paper is to back-testing Ko’s (2009) work in his research paper, Multiple Regression Model For Market Capitalization, using the same, exact methodology he used. Although our work refers to what has been done by Ko (2009) in we found some differences with him in terms of the independent variables that have the most statistically significant relationship with the dependent variable, market capitalisation as we did not use the same number of companies that he used.
INTRODUCTION In the business world, it is well understood that the main goal of companies is to earn profit as high as possible. This is why every company need to be aware of its stock prices in the relation to profit. Market capitalisation is highly essential to companies, especially public companies, as it is directly proportional to stock price. Stockholders, future acquirers, or anyone who desires to attain a general knowledge of a certain company’s value could see it from that its market capitalisation. If a company wanted to acquire some other company, the first thing to be considered is its market capitalisation. If it has a good value, or is believed to have a greater value in the future, that company is likely to be acquired by
Market Capitalisation
Duvan Lopez (Victoria University) Yen Nguyen (Victoria University) Meutia Iqbal (Victoria University)
Bayu Suropati (Victoria University)
ABSTRACT
Over the years, the importance of market capitalisation has been well acknowledged to value a certain company for its shareholders, future acquirers, and generally anyone related with the company. There are various methodologies that have been used to analyse market capitalisation, such as cash flow based analysis, real options and regression analysis. In this study, we used multiple regression analysis to determine which of the numerous important factors yield the best model for market capitalisation as the multiples approach to company valuation. The aim of this paper is to back-testing Ko’s (2009) work in his research paper, Multiple Regression Model For Market Capitalization, using the same, exact methodology he used. Although our work refers to what has been done by Ko (2009) in we found some differences with him in terms of the independent variables that have the most statistically significant relationship with the dependent variable, market capitalisation as we did not use the same number of companies that he used.
INTRODUCTION In the business world, it is well understood that the main goal of companies is to earn profit as high as possible. This is why every company need to be aware of its stock prices in the relation to profit. Market capitalisation is highly essential to companies, especially public companies, as it is directly proportional to stock price. Stockholders, future acquirers, or anyone who desires to attain a general knowledge of a certain company’s value could see it from that its market capitalisation. If a company wanted to acquire some other company, the first thing to be considered is its market capitalisation. If it has a good value, or is believed to have a greater value in the future, that company is likely to be acquired by
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