Efficiency of the Feltham-Ohlson (1995) Model in Tehran Stock Exchange

Abstract

This study seeks to examine efficiency of Feltham- Ohlsen (1995) valuation model in the Tehran Stock Exchange and is trying to identify relation between intrinsic company value and return. This model is trying to determine the intrinsic value of company using their book value. Statistical community of this study includes all TSE accepted companies and statistical sample is including 89 TSE accepted companies from different industry and data for these firms are analyzed interval 1998 to 2009 using Time series-Cross sectional (panel data) regression model. Results show that the model above boldly dose' not able to determine the intrinsic value of companies. The relationship between intrinsic value to market value ratio and price to earning value ratio is not statistically significant. In addition, companies that have little intrinsic value to market value ratios are higher than the market are assessed.

Keywords

• intrinsic company value
• feltham- ohlsen (1995) valuation model
• stock return
• market value