Bridge over ocean
1 July 2004 Financial Analysts Journal Volume 60, Issue 4

Combining Value Estimates to Increase Accuracy

  1. Kenton K. Yee

The estimates provided by discounted cash flow, the method of comparables, and market prices usually disagree. Combining two or more of these value estimates makes sense because every bona fide estimate provides information and because relying on one estimate ignores the information content of the others. How, then, should financial analysts combine different value estimates to form a more accurate estimate than that provided by any one method? Drawing from Bayesian decision theory, the Delaware Block Method, and forecasting research, this article suggests five rules of thumb for combining two or more value estimates into a superior value estimate.

Read the Complete Article in Financial Analysts Journal Financial Analysts Journal CFA Institute Member Content

We’re using cookies, but you can turn them off in Privacy Settings.  Otherwise, you are agreeing to our use of cookies.  Accepting cookies does not mean that we are collecting personal data. Learn more in our Privacy Policy.