Appendix A: Detailed information of firm sample
Firms Valuation date Industry Leverage
measure
Retained earnings
Market value of assets
aaiPharma Inc. 31-12-2004 Pharmaceuticals 79% -207 404
AEP Industries Inc. 31-10-2004 Containers and Packaging 74% 11 366
Allied Waste Industries Inc. 31-12-2004 Commercial Services and Supplies 72% 0 10777
Asbury Automotive Group Inc. 31-12-2004 Specialty Retail 72% 88 1642
Carriage Services Inc. 31-12-2004 Healthcare Providers and Services 71% -71 294
Cenveo Inc. 31-12-2004 Commercial Services and Supplies 84% -170 938
Charter Communications Inc. 31-12-2004 Media 97% -9196 19266
Constar International Inc. 31-12-2004 Containers and Packaging 80% -229 492
Curative Health Services Inc. 31-12-2004 Healthcare Providers and Services 71% -111 292 Dobson Communications Corp. 31-12-2004 Wireless Telecommunication Services 91% -1118 2764
Dura Automotive Systems Inc. 31-12-2004 Auto Components 86% -93 1422
Dynegy Inc. 31-12-2004 Multi-Utilities and Unregulated Power 71% -1950 6756
FiberMark Inc. 31-12-2004 Paper and Forest Products 97% -175 231
Foamex International Inc. 02-01-2005 Chemicals 89% -389 805
Friendly Ice Cream Corp. 02-01-2005 Hotels, Restaurants and Leisure 79% -228 307
Granite Broadcasting Corp. 31-12-2004 Media 98% -331 496
Hanger Orthopedic Group Inc. 31-12-2004 Healthcare Providers and Services 72% 0 629
Hines Horticulture Inc. 31-12-2004 Commercial Services and Supplies 75% -68 325
Insight Communications Co. Inc. 31-12-2004 Media 84% -260 3476
Knology Inc. 31-12-2004 Diversified Telecommunication Services 76% -473 337
Mediacom Communications Corp. 31-12-2004 Media 80% -679 3778
Nexstar Broadcasting Group Inc. 31-12-2004 Media 71% -410 916
Pathmark Stores Inc. 29-01-2005 Food and Staples Retailing 83% -598 797
Penton Media Inc. 31-12-2004 Media 99% -450 353
Protection One Inc. 31-12-2004 Commercial Services and Supplies 93% -1524 540
Rural Cellular Corp. 31-12-2004 Wireless Telecommunication Services 94% -791 1788
Rural/Metro Corp. 30-06-2004 Transportation Infrastructure 90% -260 299
Salton Inc. 03-07-2004 Trading Companies and Distributors 88% 130 429
SEMCO Energy Inc. 31-12-2004 Gas Utilities 78% -72 737
Silverleaf Resorts Inc. 31-12-2004 Hotels, Restaurants and Leisure 83% -11 291
Six Flags Inc. 31-12-2004 Hotels, Restaurants and Leisure 82% -909 2977
SunCom Wireless Holdings Inc. 31-12-2004 Wireless Telecommunication Services 88% -194 1800
Young Broadcasting Inc. 31-12-2004 Media 78% -392 983
Median 82% -229 737
Mean 83% -640 2052
Maximum 29-01-2005 99% 130 19266
Minimum 30-06-2004 71% -9196 231
Standard deviation 9% 1602 3771
Notes: Valuation date is the end of book year date. Leverage measure is defined as the total book value of debt divided by the market capitalization, as defined by
Firms Implied vol.
K1,T1
Implied vol.
K1,T2
Implied vol.
K2,T1
Implied vol.
K2,T2
GM vol.
K2,T1
GM vol.
K2,T2
Peer firm vol.
Book value vol.
GM Vol.
+0.5
aaiPharma Inc. NA 14.0% 35.8% 40.8% 47.1% 49.1% 58.7% 61.4% 49.9%
AEP Industries Inc. NA NA 29.9% 32.4% 8.9% 8.9% 36.3% 23.9% 15.4%
Allied Waste Industries Inc. NA NA 15.4% 20.8% 13.8% 14.9% 40.4% 11.3% 9.0%
Asbury Automotive Group Inc. NA NA 23.5% 29.0% 8.1% 8.3% 44.2% 23.7% 8.6%
Carriage Services Inc. NA NA 14.7% 14.7% 12.5% 12.5% 53.6% 14.5% 7.8%
Cenveo Inc. NA NA 14.0% 20.0% 15.2% 17.7% 39.5% 14.7% 20.4%
Charter Communications Inc. NA NA 12.6% 15.0% 10.1% 11.7% 57.4% 15.3% 11.4%
Constar International Inc. NA NA 20.2% 24.3% 15.5% 17.1% 38.8% NA 17.9%
Curative Health Services Inc. NA NA 30.8% 36.3% 26.5% 28.1% 58.7% 45.2% 39.8%
Dobson Communications Corp. NA NA 16.8% 20.3% 21.1% 23.3% 57.3% 52.1% 16.4%
Dura Automotive Systems Inc. NA NA 12.8% 16.0% 10.0% 11.2% 44.2% 10.8% 17.0%
Dynegy Inc. NA NA 11.5% 19.5% 14.9% 16.8% 28.6% 21.3% 13.4%
FiberMark Inc. 12.7% 18.6% 25.1% 32.8% 23.5% 28.9% 23.6% 23.1% 38.0%
Foamex International Inc. NA NA 21.9% 23.9% 15.0% 15.8% 36.3% 10.0% 26.1%
Friendly Ice Cream Corp. NA NA 13.3% 21.9% 15.9% 18.9% 42.2% 12.1% 9.2%
Granite Broadcasting Corp. 1.5% 3.6% 15.6% 18.1% 15.9% 17.9% 52.8% 29.5% 16.1%
Hanger Orthopedic Group Inc. NA NA 25.8% 27.6% 36.7% 37.1% 58.7% 20.1% 10.5%
Hines Horticulture Inc. NA NA 20.3% 26.0% 16.6% 18.1% 56.8% 16.2% 10.3%
Insight Communications Co. Inc. NA NA 15.9% 18.5% 7.2% 8.1% 57.4% 22.1% 8.3%
Knology Inc. NA NA 36.1% 36.1% 32.4% 32.4% 57.3% NA 34.8%
Mediacom Communications Corp. NA NA 15.0% 18.1% 10.1% 11.0% 57.4% 22.9% 9.1%
Nexstar Broadcasting Group Inc. NA NA 20.6% 24.0% 17.4% 18.0% 52.8% NA 14.2%
Pathmark Stores Inc. NA NA 21.2% 24.6% 18.2% 19.6% 25.2% 14.4% 16.4%
Penton Media Inc. NA 1.7% 11.6% 14.3% 11.5% 13.7% 39.5% 39.1% 12.9%
Protection One Inc. NA NA 15.7% 16.9% 19.4% 19.8% 64.2% 10.0% 9.3%
Rural Cellular Corp. NA NA 13.9% 15.8% 11.8% 13.2% 73.9% 114.8% 11.1%
Rural/Metro Corp. 9.9% 11.3% 24.4% 25.9% 19.8% 20.5% 58.7% 9.6% 20.3%
Salton Inc. 15.3% 17.2% 31.3% 33.8% 30.9% 31.9% 34.8% 26.4% 27.5%
SEMCO Energy Inc. NA NA 14.1% 17.9% 8.2% 9.4% 16.7% 17.1% 7.5%
Silverleaf Resorts Inc. NA NA 19.9% 19.9% 18.2% 18.2% 42.2% 12.7% 12.1%
Six Flags Inc. NA NA 14.4% 19.1% 14.6% 16.4% 50.0% 28.7% 11.8%
SunCom Wireless Holdings Inc. NA NA 17.9% 23.6% 18.5% 21.5% 73.9% 31.7% 21.2%
Young Broadcasting Inc. NA NA 19.4% 26.0% 13.3% 15.3% 52.8% 33.7% 17.5%
Median 11.3% 12.7% 17.9% 21.9% 15.5% 17.7% 52.8% 21.7% 14.2%
Mean 9.8% 11.1% 19.7% 23.5% 17.5% 18.9% 48.0% 26.3% 17.3%
Maximum 15.3% 18.6% 36.1% 40.8% 47.1% 49.1% 73.9% 114.8% 49.9%
Minimum 1.5% 1.7% 11.5% 14.3% 7.2% 8.1% 16.7% 9.6% 7.5%
Standard deviation 6.0% 7.0% 6.9% 7.0% 8.8% 8.9% 13.7% 21.1% 10.3%
Notes: The implied and observed asset volatilities are computed as discussed in chapter 5.
Appendix B: Industry concentration
Industry No. of firms % of sample
Auto Components 1 3%
Chemicals 1 3%
Commercial Services and Supplies 4 12%
Containers and Packaging 2 6%
Diversified Telecommunication Services 1 3%
Food and Staples Retailing 1 3%
Gas Utilities 1 3%
Healthcare Providers and Services 3 9%
Hotels, Restaurants and Leisure 3 9%
Media 7 21%
Multi-Utilities and Unregulated Power 1 3%
Paper and Forest Products 1 3%
Pharmaceuticals 1 3%
Specialty Retail 1 3%
Trading Companies and Distributors 1 3%
Transportation Infrastructure 1 3%
Wireless Telecommunication Services 3 9%
Total 33 100%
Appendix C: Valuation errors
Firms Log error K2,T1 / GM vol. K2,T1
Log error K2,T2 / GM vol. K2,T2
Log error K2,T1 / Peer firms vol.
Log error K2,T1 / Book value vol.
Log error K2,T1 / GM vol. +0.5
aaiPharma Inc. -27.5% -18.4% -49.5% -54.0% -33.2%
AEP Industries Inc. 121.7% 128.9% -19.3% 22.4% 66.2%
Allied Waste Industries Inc. 10.8% 33.8% -96.5% 31.4% 53.6%
Asbury Automotive Group Inc. 106.1% 124.6% -63.0% -0.8% 100.1%
Carriage Services Inc. 16.2% 16.2% -129.2% 1.8% 63.2%
Cenveo Inc. -8.3% 12.4% -103.6% -4.9% -37.5%
Charter Communications Inc. 21.8% 24.9% -152.1% -19.5% 9.9%
Constar International Inc. 26.2% 35.3% -65.5% NA 12.1%
Curative Health Services Inc. 14.9% 25.6% -64.5% -38.4% -25.7%
Dobson Communications Corp. -23.0% -14.1% -122.8% -113.3% 2.5%
Dura Automotive Systems Inc. 25.2% 35.7% -123.6% 17.7% -28.1%
Dynegy Inc. -25.6% 14.6% -90.9% -61.5% -15.0%
FiberMark Inc. 6.4% 12.5% 6.1% 8.5% -41.4%
Foamex International Inc. 38.0% 41.4% -50.4% 78.9% -17.5%
Friendly Ice Cream Corp. -17.6% 15.1% -115.1% 9.3% 37.2%
Granite Broadcasting Corp. -2.1% 0.8% -121.9% -63.6% -3.1%
Hanger Orthopedic Group Inc. -35.2% -29.3% -82.3% 24.8% 90.3%
Hines Horticulture Inc. 20.2% 36.6% -103.0% 22.5% 67.4%
Insight Communications Co. Inc. 78.7% 82.6% -128.5% -33.0% 64.4%
Knology Inc. 10.8% 10.8% -46.1% NA 3.8%
Mediacom Communications Corp. 39.6% 49.9% -134.3% -42.3% 50.0%
Nexstar Broadcasting Group Inc. 16.9% 28.6% -94.3% NA 36.9%
Pathmark Stores Inc. 15.3% 22.6% -17.5% 38.5% 25.4%
Penton Media Inc. 1.0% 4.3% -122.3% -121.1% -10.1%
Protection One Inc. -21.1% -15.9% -140.6% 45.4% 52.4%
Rural Cellular Corp. 15.7% 18.4% -167.4% -211.4% 22.5%
Rural/Metro Corp. 20.8% 23.4% -87.7% 93.4% 18.5%
Salton Inc. 1.5% 5.9% -10.6% 17.0% 13.0%
SEMCO Energy Inc. 54.1% 64.1% -17.1% -19.4% 63.1%
Silverleaf Resorts Inc. 9.0% 9.0% -75.0% 45.1% 49.6%
Six Flags Inc. -1.1% 15.6% -124.0% -68.5% 20.0%
SunCom Wireless Holdings Inc. -3.6% 9.2% -141.9% -57.0% -17.0%
Young Broadcasting Inc. 37.7% 53.3% -99.9% -55.1% 10.6%
Median 14.9% 18.4% -96.5% -2.9% 18.5%
Mean 16.5% 26.6% -89.5% -16.9% 21.3%
Maximum 121.7% 128.9% 6.1% 93.4% 100.1%
Minimum -35.2% -29.3% -167.4% -211.4% -41.4%
Standard deviation 34.9% 34.7% 45.1% 62.8% 38.1%
Firms Sensitiviy equity value K2,T1
Log error equity value K2,T1
Sensitiviy equity value K2,T2
Log error equity value K2,T1
aaiPharma Inc. 3.6% 34.6% 3.0% 22.2%
AEP Industries Inc. 2.3% -64.2% 2.2% -70.5%
Allied Waste Industries Inc. 3.2% -5.1% 3.2% -21.1%
Asbury Automotive Group Inc. 2.3% -44.5% 2.2% -60.2%
Carriage Services Inc. 3.5% -7.9% 3.5% -7.9%
Cenveo Inc. 6.5% 7.6% 5.8% -14.6%
Charter Communications Inc. 20.0% -67.8% 17.4% -85.6%
Constar International Inc. 5.1% -26.9% 4.7% -41.2%
Curative Health Services Inc. 2.9% -13.1% 2.7% -25.0%
Dobson Communications Corp. 11.3% 39.9% 10.1% 26.8%
Dura Automotive Systems Inc. 6.8% -21.5% 6.4% -36.7%
Dynegy Inc. 3.5% 11.2% 3.9% -10.8%
FiberMark Inc. 14.2% -25.1% 10.3% -50.1%
Foamex International Inc. 6.3% -57.3% 5.9% -65.6%
Friendly Ice Cream Corp. 5.0% 12.1% 4.7% -15.6%
Granite Broadcasting Corp. 26.6% 8.3% 23.6% -3.3%
Hanger Orthopedic Group Inc. 2.6% 24.6% 2.5% 21.1%
Hines Horticulture Inc. 3.7% -14.7% 3.4% -31.7%
Insight Communications Co. Inc. 5.4% -62.7% 5.1% -76.3%
Knology Inc. 3.1% -12.0% 3.1% -12.0%
Mediacom Communications Corp. 4.7% -26.0% 4.5% -38.9%
Nexstar Broadcasting Group Inc. 2.9% -9.7% 2.8% -18.4%
Pathmark Stores Inc. 5.7% -18.8% 5.2% -30.2%
Penton Media Inc. 36.7% -4.2% 31.9% -21.1%
Protection One Inc. 6.7% 22.1% 6.4% 17.0%
Rural Cellular Corp. 17.6% -43.7% 16.2% -56.3%
Rural/Metro Corp. 6.3% -34.0% 6.0% -39.2%
Salton Inc. 4.6% -2.2% 4.3% -8.8%
SEMCO Energy Inc. 5.1% -35.5% 4.9% -53.5%
Silverleaf Resorts Inc. 4.4% -7.9% 4.4% -7.9%
Six Flags Inc. 6.0% 0.9% 5.5% -16.6%
SunCom Wireless Holdings Inc. 7.9% 5.0% 6.9% -15.4%
Young Broadcasting Inc. 4.1% -28.9% 3.7% -51.5%
Median 5.1% -12.0% 4.7% -21.1%
Mean 7.6% -14.2% 6.9% -27.2%
Maximum 36.7% 39.9% 31.9% 26.8%
Minimum 2.3% -67.8% 2.2% -85.6%
Standard deviation 7.6% 27.6% 6.5% 28.5%
% within 15 percent 45.5% 21.2%
