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Towards a Coherent Theory of Valuation

Author/s: David Parker

Date Published: 1/01/2006

Published in: Volume 12 - 2006 Issue 4 (pages 426 - 445)

Abstract

Having identified examples of problems arising from the lack of a coherent and defensible body of theory underpinning valuation, the grounding of valuation theory in economic theory and the concept of worth are briefly considered. Worth is then considered within finance theory together with the classification of risk influences. Contending that valuation theory is a subset of finance theory, the concept of worth in valuation theory is juxtaposed against that in finance theory and the extent of commonality observed. Reflecting the apparent existence of a level of commonality, further development of valuation theory as a subset of finance theory would appear worthwhile for subsequent empirical testing.

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Keywords

Idiosyncratic - Price - Risk - Systematic - Unsystematic - Valuation - Value - Worth

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