The Efficiency of the Multiples Based Valuation

Over the past 2 years, curious cases of anomalies or various manifestations of market inefficiency have become more frequent on the Russian stock market. All this is accompanied by a multiple growth of brokerage accounts, the development of market access technologies and the popularity of investing among individuals. The so-called "stupid money" began to form 80% of the trade turnover. At the same time, the activity of institutional investors has decreased for objective reasons ("smart money", primarily Western funds). The combination of these observations hints at a decrease in the effectiveness of market estimates or an increase in the discrepancy between value and price, which manifests itself through an increase in the error of the valuation multiplier. The purpose of this study is to identify the effectiveness of valuations of financial companies on the Russian stock market based on multipliers. To reveal the role of fundamental determinants in the formation of value and to understand the relationship with the information efficiency of market prices. The tasks are set as part of the work: 1. To assess the impact of the escalation of geopolitical tensions and unprecedented sanctions pressure after 02/24/2022 (trigger event) on pricing and the adequacy of assessments of financial companies. 2. Calculate the amount of discrepancy between the intrinsic value and market estimates of the share capital of financial companies. 3. Determine the presence of a causal relationship between market efficiency and the accuracy of estimates using multipliers. As a result, it was found that after the trigger event, there was an increase in the error of both P/B and P/E, which means that the accuracy of the multipliers or the effectiveness of estimates decreased. For P/B, it is shown that this is a consequence of the growing inefficiency of the stock market. There is no causal relationship for the P/E error. It is also noted that non-bank financial institutions are either overvalued, or banks have additional risks that affect market valuations. With comparable inputs (profitability, growth), banks' multipliers are lower.