Percorrer por autor "Guermandi, Gregorio"
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- On the application of structural models for equity valuation : lessons for the futurePublication . Guermandi, Gregorio; Silva, Nuno Ricardo Raimundo Rodrigues Marques daThis dissertation explores a modified version of the structural model for equity valuation developed by Eisdorfer, Goyal and Zhdanov (2019) and tests its performances over the cross-section of U.S. stocks from 2015 to 2019. This study observes that the model generally works well, leading to a root-mean-square error of 17% under the base-case. Plus, the average pricing error appears close to 0 and statistically non-significant in every year except 2015. Then, the pricing errors are studied to understand the model’s pitfalls. Through the estimation of a fixed-effects panel data model with 1256 firms across my 4 years, it is shown that the errors are related with some fundamentals that are either i) not taken into account in the model, such as cash holdings, short-term growth expectations and intangible assets, or ii) are not properly considered. Among this second group, the model seems not to properly address the effect of leverage, dividend payments and operating leverage on equity values. Finally, some of the assumptions done in the base-case were questioned in the last section. In particular, the robustness checks performed suggested that SG&As are not a good proxy for fixed costs as they have a high correlation with sales, this finding corroborates the conclusion taken from the panel data model suggesting that SG&A were too high and correlated to be a good proxy for fixed costs. By over-estimating firms’ fixed costs, the model is wrongly shifting the barrier of default upwards, which contributes to the undervaluation of stocks.