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Senior Economist
- Los Angeles, CA
- mmartosvila@econone.com
- (Main) 213.624.9600
Education
Ph.D. in Economics, Princeton University, Princeton, NJ (USA)
Work Experience
Econ One Research, Principal/Senior Economist, 2015 – Present
London Business School, Visiting Professor of Finance, 2012–2015
UCLA Anderson School of Management, Professor of Finance, 2006–2012
Claremont McKenna College, Robert Day School of Economics and Finance, Visiting Professor of Finance, 2011–2012
ESADE Business School, Visiting Professor of Finance, 2013–2014
Princeton University, Teaching and Research Assistant, 2003–2006
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During my career as a finance professor and economic consultant, I have often been asked the question of who is best equipped to perform valuation analysis – economists, accountants, or investment professionals. That accountants serve as valuation experts should come as little surprise because, as I used to explain in my corporate valuation class, valuations often start with the analysis of and input from financial statements prepared by accountants. In this brief article, I explain why economists are best equipped to perform valuation analyses and the benefits an economist offers particularly in the context of litigation.
In litigation settings, having an economist serve as the valuation expert is necessary due to their specialized knowledge and skills in assessing economic impact, analyzing data, and understanding market conditions. Here are four key reasons why an expert economist should be the choice for valuation needs specifically in the context of litigation:
Economic Theory and Market Analysis is Crucial
Economists are trained to understand economic theories, which allow them to analyze the behavior of economic agents – individuals or corporations, and market conditions, including supply and demand factors. Both microeconomic behavior as well as broader market conditions influence the value of assets, businesses, or damages. In litigation, especially in complex cases like business disputes or antitrust matters, understanding the behavior and broader market forces is essential for producing accurate valuations. This is particularly true because the calculation of economic impact or damages often requires the valuation of a counterfactual (often known as the “but-for” scenario).
Quantifying Economic Damages is Increasingly Complex
In cases involving economic damages, such as lost profits or diminished business value, statistical analysis and econometric models are becoming the norm, due in part to the increasingly large amount of data collected by corporations in their ordinary course of business, and also the ability to analyze such vast amounts of data. Statistical analysis and econometric models are often needed to quantify the loss in a precise, reasonable, and scientific manner. Economists are trained to conduct such analysis and develop such models, incorporating various factors like industry performance, broader market conditions, and historical data to provide a thorough and unbiased assessment of the economic impact.
Defensible, Data-Driven Valuation and Testimony
As economists, we often rely on data and statistical analysis to support our conclusions, as explained above. In a litigation setting, our ability to understand and analyze vast amounts of data and provide a rigorous, data-driven valuation that can hold-up to potential scrutiny under cross-examination is critical. Our methodologies can, and must, be grounded in well-established methods, making our findings more credible and difficult for opposing counsel to discredit.
Broad Applicability Across Cases and Industries
Most real-life settings can be framed by general economic principles and theories. Economists can assess the circumstances of the case at hand with those economic principles and theories in mind. This means they are well-equipped to handle a wide range of valuation needs across various legal matters—breach of contract, antitrust, intellectual property, personal injury, wrongful termination, or environmental cases. Similarly, common economic principles and theories apply to a wide range of industries, broadening the scope of valuation beyond the single-industry lens. Economists’ ability to understand and quantify the economic implications of a case makes them valuable, no matter the context.
In summary, economists bring a unique combination of technical expertise, in-depth knowledge of economic principles, and the ability to analyze and understand large amounts of data. These are all essential and a primary reason why an economist offers a unique benefit in complex valuation scenarios. Their ability to assess both macroeconomic and microeconomic factors allows them to produce precise and defensible valuations that can stand up to rigorous legal scrutiny.