Discussion: "The Ohlson Model: Contribution to Valuation Theory, Limitations, and Empirical Applications"

The author critiques the paper "The Ohlson Model: Contribution to Valuation Theory, Limitations, and Empirical Applications," by Kin Lo and Thomas Lys published in the Summer 2000 issue. The researchers are commended for doing a good job differentiating between the residual income valuation (RIV) and the Ohlson Model. Their analysis about the lack of potential interest in testing the RIV is also intuitive according to the authors. However, a potentially better approach econometrically is to estimate the equation with proper constraints on the coefficients.