A COMPARISON OF FORECAST ACCURACY AMONG STOCK PRICING MODELS: EVIDENCE FROM MALAYSIAN LISTED COMPANIES

  • Nai-Chiek AIK University of Tunku Abdul Rahman
  • Peck-Ling Tee University of Tunku Abdul Rahman
Keywords: Forecast accuracy, Stock pricing models

Abstract

Discovering the best model that is able to predict equity values that most closely approximate the actual equity values observed in the market place has always been an area of concern for financial analysts and other stakeholders. This paper tackles this issue by comparing various stock valuation models in terms of their relative forecast accuracy in the Malaysia context. The findings reveal that PE (Price-to-Earnings) model produced the lowest mean absolute forecast error for the overall sample companies as well as in the perspective of large firm size. The results indicate that PE model generally outperforms DGM (Dividend Growth) model and OCF (Operating Cash Flow) model and hence conclude that PE model is the most robust model among stock pricing models. As such, all stakeholders should focus more on information conveyed by earnings in order to enhance their forecast of stock prices.

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Published
2019-03-05
How to Cite
AIK, N.-C., & Tee, P.-L. (2019). A COMPARISON OF FORECAST ACCURACY AMONG STOCK PRICING MODELS: EVIDENCE FROM MALAYSIAN LISTED COMPANIES. Journal of Contemporary Issues and Thought, 2, 93-102. Retrieved from https://ejournal.upsi.edu.my/index.php/JCIT/article/view/934