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Valuation Of Unlisted Direct Investment Equity

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Executive Summary

This paper analyzes the seven valuation methods for unlisted direct investment equity included in the recently adopted IMF Balance of Payments and International Investment Position Manual, Sixth Edition (BPM6). Based on publicly available Danish data, the author tested the three methods that are generally applicable and find that the choice of valuation method and estimation technique can have a highly significant impact on the international investment position, pointing to the need for further harmonization. The results show that the price-to-book value method generates more robust market value estimates than the price-to-earnings method.

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