Excess Return Valuation Model Based On Improved DCF Model

With the rapid development of China’s reform and opening up as well as the financial economy,the investment theory of capital market also needs further development so that investors can refer to it in many aspects in the process of value investment.The value investment theory plays an important role in the eyes of international investors,and the value investment theory has been put forward since Graham,which is to advocate the discounted cash flow model(DCF model)in the evaluation of investment Therefore,DCF model has a profound impact on investment theory.Based on the theory of value investment,this paper introduces the time series analysis method to improve the DCF model,and analyzes the factors that affect the change of the enterprise value.The internal value of the enterprise can be estimated by the improved DCF company.In the research of securities investment,considering that there are some deficiencies in the application of the existing DCF model based on the American capital market to the domestic capital market,this paper analyzes the internal value of the enterprise It is necessary to improve,this paper has two improvements,the first is to simplify the calculation method of FCF;the second is to use the time series analysis method instead of the percentage of sales method to predict the future cash flow.After the FCF calculation method is simplified,the factors in the DCF model can be obtained from the financial statements.The time series analysis method can predict the future cash flow with the help of Eviews analysis software according to the change rule of the historical cash flow.However,the former’s estimation of DCF parameters will be subjective,so there may be higher estimation deviation.In this study,these two improvements are also used in specific industry analysis to monitor the effectiveness of valuation.Through the value investment analysis of clothing and furniture industry and liquor industry,it is found that the improved DCF model can better reflect the annual growth rate of cash flow of enterprises,and can effectively predict the price risk of securities investment.The results of this study show that the joint venture in clothing and furniture industry In the extreme environment of trade war,Wuliangye enterprises in the stock issuing enterprises and liquor industry can still get far more returns through the improved DCF model than the non improved DCF model.This shows that the improved DCF model can better evaluate the internal value of listed companies.When investors make value investment in the securities market,they can properly use this method for reference to estimate the value of other targets in the securities market,so as to improve the accuracy and scientificity of value investment.