The Analysis of Valuation Model for NASDAQ and Intangible Intensive Firms : Implication of Uncertainty

Using a valuation model, I find that uncertainty about firms varies across the levels of (1) prior information available about the firms, and (2) their intangible assets usage. I find the magnitudes of the coefficients on earnings and BVE for firms that employ intangible assets intensively are higher after controlling for limited prior information. This suggests that two types of uncertainty are impounded in the valuation coefficients on earnings and BVE, resulting in downward bias on these coefficients. Also, the magnitude of the valuation coefficient on earnings (BVE) is higher (lower) for firms with higher operating cash flow. This indicates that there is a potential substitution effect between earnings and BVE as the amount of noise in earnings increases. Finally, I find that abnormal trading volume for NASDAQ firms is higher than for non-NASDAQ firms, this is consistent with the size effect suggested by prior studies