AUTHOR: Bolor Buren, Altan-Erdene Batbayar, Khishigbayar Lkhagvasuren
PUBLISHED IN: Volume 6 Issue 1
KEYWORDS: Equity Research, Valuation Methods, Target Price, Valuation Accuracy, Mongolian Stock Exchange, Ohlson Model
ABSTRACT
This study evaluates the predictive performance of leading equity valuation methods in the setting of the Mongolian Stock Exchange (MSE), a frontier market characterized by developing regulatory oversight and a limited analytical infrastructure. Using content analysis of 32 IPO valuation reports (2011-2023) prepared by licensed Mongolian valuation firms, we classify and assess the accuracy of discounted cash flow (DCF), dividend discount model (DDM), residual income model (RIM), net asset valuation (NAV), and relative valuation approaches. The empirical results show that the Residual Income Model (RIM) achieves 24.7% prediction accuracy within a 5% error tolerance, while a hybrid model (combining multiple approaches) exhibits stronger predictive capability, reaching 44.9% accuracy within a 10% tolerance. In practice, RIM is predominantly applied to financial institutions’ IPOs and demonstrates relatively strong performance. Accordingly, for Khan Bank, we adopt the Ohlson (1995) model, grounded in the RIM framework. Applying the Ohlson model to Khan Bank’s IPO data further improves target value accuracy, delivering gains between 7.7% and 73.1%, thus underscoring the model’s potential to enhance valuation reliability in frontier markets.
DOI: https://doi.org/10.65194/IJBI-2026-1001
