Perspectives: Combining Value Estimates to Increase Accuracy

Discounted cash flow, method of comparables, and market price usually disagree. Combining two or more of these value estimates makes sense because every bona fide estimate provides information, and relying on just one estimate ignores the information content offered by the other estimates. Drawing from Bayesian decision theory, the Delaware Block Method, and forecasting research, this article suggests five rules of thumb for combining two or more value estimates into a superior value estimate.