Impact of Company’s Fundamentals on its Share Price
Impact of Company’s Fundamentals on its Share Price
Introduction
The present geopolitical tensions, which coincide with the long-running 2007 global financial crisis, have had painful consequences for the worldwide community's economic and financial circumstances, particularly on stock, oil, and share prices in the first quarter of 2008. Emerging markets, it seems, were not immune to similar shocks. The problem of stock market integration arises here because a fully integrated stock market presupposes comparable pricing as well as parity in risk premiums. According to Verrecchia (2001), financial reporting systems offer important information to the capital market, and when investors trade stocks on the basis of the aforementioned information, stock prices converge to their intrinsic values. Furthermore, such information is deemed valuable if it has an impact on stock price fluctuations.
However, the present state of uncertainty requires investors to understand certain unquestionable analytical tools that will assist them in making reasonable, logical, and prudent investing choices, in addition to understanding their connection with the market price of shares (MPS). Nonetheless, a few pertinent theories widely accepted by the investment community serve as potential explanations for MPS variations. The Gordon (1962) growth model, in which investors base stock values on the discounted present value of future anticipated dividend payments, is unquestionably the most basic method used.
Conclusion
This fundamental transformation in the form of capital market deregulation and other regulatory changes is all indicative of a rise in both an equity culture and greater financial intermediation via unconventional channels in the MENA region. As a consequence, conventional banks' roles are diminished, and focus is placed on improving capital markets' capacity to channel money for general economic growth. This encourages authorities to promote secondary trading while also harnessing and expanding a robust investor base by guaranteeing an efficient and transparent capital market.
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