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A New Approach to the Valuation of Intangible Capital

A New Approach to the Valuation of Intangible Capital

Chapter:
(p.47) 2 A New Approach to the Valuation of Intangible Capital
Source:
Measuring Capital in the New Economy
Author(s):
Jason G. Cummins
Publisher:
University of Chicago Press
DOI:10.7208/chicago/9780226116174.003.0003

This chapter discusses conceptual and measurement issues about the market valuation approach to measuring intangible capital that has appeared in the recent literature. It explains how intangible capital is measured in the market valuation approach and proposes to consider intangibles within an adjustment-cost framework. The application of the proposed method in earnings forecasts reveals that this approach finds a substantial, but much smaller, valuation of intangible capital. It also provides a different perspective about what intangibles are and how researchers can estimate their return.

Keywords:   market valuation approach, intangible capital, adjustment-cost framework, earnings forecast, estimate of return

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