Reconstructing the Income Approach

Dr. Andrey Artemenkov

“Reconstructing the income approach theory of asset valuation based on the Transactional Asset Pricing Approach (TAPA)”.

Abstract: TAPA is a novel analytical valuation methodology recasting the traditional derivations of the income approach techniques, including DCF, from a transactional perspective based on the principle of inter-temporal transactional equity, instead of the conventional investor-specific view originating from Irving Fisher or lack of arbitrate argument developed by Modigliani and Miller. Unlike CAPM, TAPA is explicitly a multi-period asset pricing model, allowing for the use of time-variable discount rates under DCF. Novel justifications for the DCF approach, the direct income capitalization and the Gordon model will be presented. For researchers of market cycles, the TAPA view can provide a powerful tool for studying the impact of market cycles on asset pricing.