Does the EVA valuation model explain the market value of equity better under changing required return than constant required return?

Through the Economic-Value-Added(EVA)valuation model,the expected market value of equity can be determined by adding the book value of equity with the present value of expected EVAs under the assumption of constant required return and constant return on equity.The equation of EVA valuation model has taken its shape under the assumption of constant required return and constant return on equity.However,a large body of empirical evidence indicates that required rate of return never remain constant.The EVA-valuation model formulated under constant required return cannot be implemented under the scenario of changing required return.In this study,we explored whether the EVA valuation model could be implemented under changing required return by making any changes in the model and found that it could be implemented under the scenario of changing required return by replacing the book value of the equity of the existing model with the present value of required earnings or normal market earnings.We further examined whether the explanatory ability of the EVA valuation model under the assumption of changing required return is better than that of the valuation model under the assumption of constant required return.Relative information content analyses were conducted by considering sample of the intrinsic value of equities determined by valuation models and the market value of equities of 69 large-cap,88 mid-cap,and 79 small-cap companies.The results showed that the EVA-based valuation model with changing normal market return outperformed the EVA-based valuation model with constant required return.

Market Economy Requires Wise Government Intervention

In China where there is a profound influence of "local magistrates as citizens’ parents" in the traditional sense, people are naturally inclined to rely on government authorities

The Impact of Education on Innovative Economy Polish Experiences

Methods and concepts of innovation performance are widely analyzed, discussed, and evaluated. The influence of educational management on the creation of innovative economy is not widely described in literature, however, procedures of innovation performance include the measures of educational elements. The paper discusses the methodology of European Innovation Scoreboard （EIS） and Innovation Union Scoreboard （IUS） in the aspect of education for innovative economy. Educational indicators in EIS/IUS methodology are quantitative and do not include information about the quality of education. Researchers agreed that innovation processes and economical growth require well-educated and skilled workforce and they assume that skilled workers are on output of the educational system. The measurement system of innovations in Europe includes various economical aspects, allows to observe trends and gives opportunity to improvement for countries and is directed on future educational effects. Quantitative indicators allow to observe trends, educational needs, desires of pupils, and their parents. The efficiency of these indicators is presented on the example of Poland. Educational indicators to improve innovation performance should be very synthetic, but cannot lose important information. The article presents author＇s research on graduate career paths and suggests to include elements of this methodology in the measurement system of innovation economy.