Kyungpook National University

Decomposition of Intangible Assets into a Permanent and a Transitory Component

Email address: khjeong@knu.ac.kr

Abstract:
As intangible assets have become more important source of the value-added, several evaluation methods have been developed; for example , Return on Assets(ROA) Method, Market Capitalization Method(MCM), and Direct Intellectual Capital(DIC) Method. In ROA method, however, discount rate is determined ad hoc, MCM is subject to severe short-term fluctuation of capital markets, and DIC method requires inside information on target firms. This paper introduces a new estimation procedure for estimating intangible assets which is based on statistical criteria, filter out short-term market noise, and requires only information easy to obtain. The new approach begins with estimation result of MCM for intangible assets. Then the Kalman filter is used to decompose the estimation result of MCM into a permanent and a transitory component. This approach turns out to allow more reliable evaluation of intangible assets.

PDF file of paper: jeong.pdf

Session: Asset Prices I

Time: Saturday, 7 July, 2:15pm - 3:45pm

Room: E