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Mispricing can explained by the sum of: true mispricing and estimation error
Ve–p = (v–p) + (VE–V)

If the asset is expected to benefit the owner of the foreseeable future, the valuation of the asset are carried out on a go ing concern basis and the value of the asset is called going concern value.

Liquidation value.

The value of an asset was called fair market value if the value was determined in a trading transaction between willing and Knowledgeable parties (buyers and sellers) when parties is not under any compulsion to engage in the buying or selling AC Tivities.

In many circumstances assets is worth more than their fair market value to a particular buyer because of their specific B Enefits to that buyer. These benefits is usually called synergy effects. The difference between fair market value and the price paid for the asset are called "Goodwill" in accounting term S.

The process for equity valuation begins and business understanding. Analysts who is going to value equity of a particular company must carefully analyze the industry and the market the comp Any are operating in and also answering the following Questions:is the industry the company are operating in vulnerable t o Business cycles? What is the primary competitors and share of the company being valued? What is the future trends of the sales of the company? What is the main value drivers? usually done by Applying Porter ' s five forces analysis< /span>.

Forecast:top down, bottom up

Equity valuation models can be classified into, broad categories:absolute valuation models and Relative valuation mode Ls. Absolute valuation models is designed to estimate intrinsic value of a asset based on either it future benefits or mark ET values. The absolute models is further divided into the Categories:present value models and asset-based valuation models.There is three groups of models under present value Models:dividend discount models, free cash flow models and residual Income Models.

The companies that generate revenue from many unrelated segments can be better valued using sum-of the-parts valuation (sometimes called Break up value or private market value).

Some researchers suggest, tend to value a company less than the sum of its segment values, a phenomenon called Conglomerate discount.

Possible explanations for conglomerate discounts is the following:1) inefficient diversification by companies (Diversifi Cation on the company level rather than the shareholder level does not maximize shareholders ' wealth '; 2) inability of organic growth, so companies tend to grow through acquisition; 3) Mismeasurement of intrinsic value (conglomerate discount does not exist).

The difference between expected return and required return is calledexpectedAlpha (Ex-ante Alpha),And the difference between realized return and contemporaneous required return is calledRealized Alpha(Ex-post Alpha).

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