Pricing liquidity and managing corporate bias: two new working papers from HBS

BVWireIssue #50-1
November 1, 2006

two new working papers from HBS
In its latest blast to business leaders, Harvard Business School asks “why is it so difficult for companies to estimate with some degree of accuracy their sales and operation needs more than a year out?” Built-in biases cloud corporate forecasters’ judgment, says a new working paper that studies supply-chain forecasting and analyses consensus forecasting in an electronics firm; to read the article abstract, with links to the full-text, go here.

A second HBS working paper researches the notion of liquidity as a transaction cost/performance measure of market structure. “In real world capital markets, investors and corporations generally do not expect to transact at fundamental value. Rather, market participants face some degree of illiquidity, where they must sacrifice price, trade size, or speed of execution. For more, click here.

These two topics couldn’t be more timely: At the sold-out CICBV/ASA Business Valuation conference in Toronto last month, Ashok Abbott, MBA, Ph.D. (West Virginia University) presented the latest data on liquidity in asset pricing to the 700+ attendees. In another plenary session, fellow academic Teri Lombardi-Yohn, Ph.D. (University of Massachusetts) offered current research to verify and test the inputs and projections used in management-prepared forecasts. Look for BV-specific articles on both topics in the next Business Valuation Update™. To subscribe, click here.

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