Scandinavian Working Papers in Economics

UiS Working Papers in Economics and Finance,
University of Stavanger

No 2015/18: Who's a major? A novel approach to peer group selection: Empirical evidence from oil and gas companies

Frank Asche () and Bard Misund ()
Additional contact information
Frank Asche: UiS, Postal: University of Stavanger, NO-4036 Stavanger, Norway
Bard Misund: UiS, Postal: University of Stavanger, NO-4036 Stavanger, Norway

Abstract: This study presents a novel approach to selecting comparable companies in equity valuation. While valuation multiples is probably the most common valuation method in practice, discounted cash flow and residual income valuation models are advocated by academics. A key aspect in valuation by multiples is peer group selection. In this paper we examine the usefulness of econometric techniques in peer-group selection for the largest companies in the international oil and gas sector. Using Chow tests we are able to identify firms with similar relationships between valuation multiples and relevant value drivers.

Keywords: Oil and gas companies; valuation; valuation multiples; peer groups

JEL-codes: G12; Q33; Q35

26 pages, December 18, 2015

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