Abstract\nThe residual income valuation model is an alternative model to the discounted cash flow method or valuation based on multiples in determining a company’s value. It decomposes the company’s value into two imaginative parts: (1) the real assets of the company. It is assumed that these assets are leased to the company at a certain rate of return. (2) The present value of the future “Residual Incomes”. Residual income refers to the income part which is achieved above the expected return on the real assets (the previously mentioned first part). Thus we examined the effects of discounted residual income (DRI) on stock price of companies listed in Tehran Security Exchange (TSE) by method curve fitting with sinusoidal functions. Our sample includes 1920 firm- year of companies listed in TSE during the period 2005-2010. The results show that there is a significant relationship between discounted residual income and firm’s value and we can predict stock price by discounted residual model. Also the result shows that if we use method curve fitting with sinusoidal functions for fitting model, we can regress the best model and the predicting power of model will increase.

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