David Tranv,
With respect to your first question, I follow Li and Mohanram (2014, Review of Accounting Studies 19:1152-1185), so my forecasts are ROE forecasts. Your adjustment is correct if you are simply using analyst earnings forecasts.
With respect to your second question, you are correct if you follow Eq. (6) on page 142 of Gebhardt et al. (2001). However, if you are following the Gebhardt et al. measure as described in Appendix 2 of Li and Mohanram (2014), then my coding is correct. Either way, this is a moot point as these should be mathematically equivalent. The only difference is that my coding explicitly provides a forecast of period 12 before constructing the terminal value, making the terminal value calculation and assumptions clearer to discern (hence why I follow Li and Mohanram).
With respect to your first question, I follow Li and Mohanram (2014, Review of Accounting Studies 19:1152-1185), so my forecasts are ROE forecasts. Your adjustment is correct if you are simply using analyst earnings forecasts.
With respect to your second question, you are correct if you follow Eq. (6) on page 142 of Gebhardt et al. (2001). However, if you are following the Gebhardt et al. measure as described in Appendix 2 of Li and Mohanram (2014), then my coding is correct. Either way, this is a moot point as these should be mathematically equivalent. The only difference is that my coding explicitly provides a forecast of period 12 before constructing the terminal value, making the terminal value calculation and assumptions clearer to discern (hence why I follow Li and Mohanram).
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