Valuation Techniques: Discounted Cash Flow, Earnings Quality, Measures of Value Added, and Real Options

ACKNOWLEDGMENTS

We thank the Research Foundation of AIMR for the opportunity to write this chapter and Keith Brown for his support of the project. We also received helpful feedback from our colleagues at the University of Texas at Austin and Indiana University—especially Daniel Beneish, Michael Clement, Roger Martin, Bob Parrino, Curt Rogers, and Jim Wahlen. We received comments on various parts of the project from workshop participants at Cornell University, the University of Florida, the University of Illinois, Indiana University, Ohio State University, the University of Utah, and Virginia Tech. The participants at the IU-NDU-PU Summer Research Conference, the Eighth Annual Conference on Financial Economics and Accounting, the University of Texas Summer Brownbag Workshop, the Financial Accounting Standards Board Professional Development Session, the 1998 Midwest AAA meeting, the 1998 Behavioral Decision Research in Management Conference, the 1998 American Accounting Association Annual Meeting, and the 1998 Journal of Accounting Research Conference also provided valuable comments. Lynette Wood provided research assistance.

We owe special thanks to Jeff Lucado, Walter Koon, Thomas Pence, and Gary Stratten for their efforts in helping us develop and administer the experiment reported in the section “How Buy-Side Equity Analysts Use Earnings in Valuation.” In addition, we are indebted to the professional analysts and portfolio managers who unselfishly and anonymously donated their ...