Comparison of the Valuation of Technology Firms in KOSPI and KOSDAQ

Abstract

The purpose of this study is to compare the valuation of technology firms in the KOSPI and KOSDAQ. This study analyzed 224 market reports for KOSDAQ firms and 602 reports for KOSPI firms. We compare the two markets under 3 definitions on the accuracy of stock price forecasting. Findings are as follows: Although PER multiples is the most used method of valuation, KOSDAQ valuation more heavily relies on the method than KOSPI valuation. In stock market, the period of earnings forecasting is mostly 2-3 years. Multiples of KOSDAQ is generally higher than those of KOSPI. Even for technology firms, valuation in KOSPI mostly relies on earnings of the company, but that in KOSDAQ mostly relies on relative price. In stock price forecasting, generally overestimation prevails. Moreover, forecasting of KOSPI reports is more accurate than that of KOSDAQ reports. ROE and COE of KOSDAQ firms are generally higher than those of KOSPI firms.

Cultural and Non-Cultural Holiday Effect in Japanese and South Korea Stock Markets

“…Even for technology firms, valuation in KOSPI mostly relies on earnings of the company, but that in KOSDAQ mostly relies on relative price. Forecasting of KOSPI reports is more accurate than that of KOSDAQ reports (Kee-Heon Cho, 2015).…”