William P. Dukes

How Do Practitioners Value Common Stock

Early work in the 1970s documented a significant difference between the valuation of stock as taught by academics and as practiced by investment professionals. We revisit the issue of practitioner valuation of common stock using a survey-based investigation. We find that most practitioners use multiple techniques, that those techniques vary across the time horizon employed to estimate future variables and that the significant gap that existed between academics and practitioners continues to this day. We extend earlier work to examine differences between analysts working for different types of institutions and with different asset management styles.

Random Walks in World Money Rates

Interest rate changes in major industrialized countries are examined and found to exhibit significant deviations from random walks. When measured over short horizons, interest rate changes demonstrate significant negative serial correlation. As the time horizon is extended, the negative dependencies decline and interest rate changes approach random walks. In general, the evidence suggests that short-term interest rate changes in major industrialized countries follow a mean-reverting process.

Mutual Fund Exit and Mutual Fund Fees

We examine the effect of mutual fund fee structure on mutual fund exit mode and timing. The evidence presented herein is consistent with fee maximization by mutual fund sponsors or managers, increased conflicts of interest for funds charging 12b-1 fees and higher management fees, and a pecking order for mutual fund exit method. Specifically, mutual fund exits that result in decreased fee income are delayed relative to exits that do not and exit strategies that retain fee income are more likely than strategies that do not.

Business Valuation Basics for Attorneys

Of all of the businesses in the Nation about .5% could be classified as actively traded, the other 99.5% require special treatment for valuation purposes. A number of the important issues are reviewed, all of which should be understood by all Attorneys who could have clients involved in business valuations. Issues are related to accounting practices, premiums, discounts of various sorts, required return, capitalization rates and proxies for variables not available. Most of the issues are illustrated in a practical valuation. Quantification of a number of the variables is illustrated as well.