Asset Valuation: A Synthesis of Existing Literature and New Insights

Abstract

Studies on asset valuation or pricing have long been a mainstay in research on finance. They constitute one of the unique cores of the growing literature in this relatively young discipline. In finance, valuation is the process of estimating the worth of an asset. Assets include investments in marketable securities such as stocks, options, business enterprises, including intangible assets such as brands, patents and trademarks. Valuations are important not only from the point of view of investment analysis, but also includes decisions on merger and acquisition, capital budgeting, financial reporting, determination of tax liability, in litigation, and due diligence among others. Researchers have worked on various genres of valuation models; however, despite over five decades of extensive research in this area, research findings remain inconclusive. This paper argues that one of the plausible reasons behind these ambiguous findings is market efficiency, which has not been explored or addressed adequately. Most importantly existing research has decoupled the two areas as independent and mutually exclusive. The paper opines that integrating the above areas can help explain the inconsistencies in existing findings and simultaneously throw open new insights in this field of study.