Live from BVR...the valuation essentials of regression analysis

Blake Lyman, director of programs for BVR, has just introduced Bill Kennedy (FTI Consulting), the presenter for today's 4 CPE seminar Advanced Workshop on Regression Analysis for business appraisers and financial analysts.  "This is material taken from more than three college and graduate level courses, so there's no way you can pull together everything taught in refinement of hypothesis testing," he said, leading off, "but the materials should refer you to areas for further study."

Also Kennedy recommends the Excel Data Analysis add-on, "though there are many tools out there to help you do, or ask about, these kinds of analyses."  Much of this is at the center of the ABV or ASA exams, for example.  "We teach and often test geometric mean as a measure of central tendency," for instance, Kennedy said.    Why?  "Because it's an effective way to measure changes in percentage change."

Others are measures of dispersion, most commonly the variance of the standard deviation.  "Many of these statistical theories have very direct application to valuation activities," he reminds attendees.   A simple example is the statistical concept of  coefficients of variation.  "In  valuation, this is an essential tool to analyze which sets of data are most robust," he says. Or, correlation analyses can seem pretty abstract until they're applied to some valuation relationship between two variables--the CPI and target company revenue growth, for instance, or the relationship between stock indicies and industry performance.