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Digest Finance
 

Behavioral valuation in the Russian and Western stock markets

Vol. 28, Iss. 4, DECEMBER 2023

PDF  Article PDF Version

Received: 28 November 2019

Received in revised form: 12 December 2019

Accepted: 26 December 2019

Available online: 28 December 2023

Subject Heading: THEORY OF FINANCE

JEL Classification: C9, C92, D81, D90, G02

Pages: 461–478

https://doi.org/10.24891/fc.26.3.549

Semen Yu. BOGATYREV Financial University under Government of Russian Federation, Moscow, Russian Federation
sbogatyrev@fa.ru

https://orcid.org/0000-0002-6080-5869

Subject. The article discusses changes in qualities of market actors that influence the valuation of assets, behavioral valuation, ranges of the valuation apparatus components. I focus on the practical implementation of the behavioral pricing and a technique for assessing key indicators of behavioral valuation of assets.
Objectives. The study measures ranges of certain values adjusting the beta coefficient, which is used to assess the discount rate under the CAPM so as to arrive at the behavioral discount rate and market value of assets in markets with reference to behavioral factors.
Methods. The article demonstrates how the behavioral pricing apparatus is applied. I also present some computations, propose benchmarks for assessing the adjustment to components of the discount rate formula for valuation purposes and in line with the emotional tone in stock markets.
Results. I devised and implemented the technique for measuring the emotional tone of news and integrated methods for assessing the behavioral beta in accordance with the behavioral CAMP of Hersch Shefrin and Meir Statman. I tested and verified the hypothesis stating that emotions cause the beta coefficient, which is used by irrational investors use, to diverge from the one embedded in the CAPM. The article shows a range of the beta coefficient used by irrational investors from the one embedded in the CAPM. It can be used to assess the market value of shares in a particular case.
Conclusions and Relevance. The theory of behavioral valuation of financial assets was put into practice, unveiling the value of the discount rate constituents, which can serve for cost analysts and appraisers. The findings are useful for valuation, corporate finance, public and municipal finance, fiscal issues, stock exchanges. Behavioral valuation tools are especially relevant in case of instability and crisis, a changing market paradigm, market developments, changes in the rate of return and volatility of financial instruments. Behavioral valuation tools supplements and expands the classical one, improves decision-making on value management in modern markets.

Keywords: behavioral finance, behavioral valuation, irrational beta, beta coefficient, behavioral discount rate

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