Download or read book What Drives Stock Prices Fundamentals Bubbles and Investor Behavior written by Yen-Hsiao Chen and published by . This book was released on 2009 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Using a dynamic version of the present value model and a range of developed and Asian emerging markets, this paper considers estimates of stock market prices given expectations on dividends and earnings and compares these fundamental stock prices with actual stock prices. The reported empirical results suggest that a dynamic present value model combined with differing definitions of cash flows can explain actual stock price movements for many of the sample markets. For markets where price deviations from fundamental value are statistically significant, the revealed deviations are investigated by considering types of investor behavior which might drive such departures.
Download or read book Investors optimal response to stock price bubbles written by Maximilian Wegener and published by GRIN Verlag. This book was released on 2013-04-08 with total page 27 pages. Available in PDF, EPUB and Kindle. Book excerpt: Bachelor Thesis from the year 2013 in the subject Business economics - Investment and Finance, grade: 8.0, Maastricht University, language: English, abstract: According to the efficient market hypothesis there should not be an asset overvaluation. Nevertheless, bubbles appear from time to time in the real world. In a financial bubble, the price of a security deviates grossly from its fundamental intrinsic value (Watanabe, Takayasu & Takayasu, 2007). Fundamentals or fundamental value refer to economic variables such as discount rates or future cash flows (Siegel, 2003). Depending on the valuation technique one can define an asset’s intrinsic or fundamental value, based on economic variables and assumed growth. A financial bubble is defined as a price run-up, where an initial price rise generates positive expectations of higher future prices, which attracts new buyers that are rather interested in reaping profits by trading the assets than using its earnings capacity (Siegel, 2003). There is a long history of bubbles such as the 1720 South Sea bubble, 1929 the Great Crash, in the mid-1970s the REIT bubble, in 1987 the housing crash, in 1991 the banking crisis, in 2002 the NASDAQ technology bubble and just recently the housing bubble in the United States, just to name a few. This capstone assignment deals with the question of how investors should act in the case of asset overvaluation in financial markets. In particular, it tries to answer how investors should behave. The central question asks whether investors should step aside and wait until the bubble bursts, whether they should ride the bubble or trade against it. Of course, there is support for all three, albeit contradicting theories. The different trading and investment strategies are reviewed, thereby touching upon various asset bubbles, financial concepts and empirical evidence in the academia. Moreover, it is elaborated on positive feedback trading and rational speculations, as well as behavioral finance concepts such as herding or overconfidence. The remainder of this paper describes different concepts outlined in the empirical literature, starting with asset overvaluation, followed by the efficient market hypothesis and the random walk phenomenon. The role of arbitrage traders is explored, and their impact on efficient markets and bubbles discussed. A review of behavioral traits during bubbles and the impact of human behavior on asset prices is included. Further, there is an examination of mutual fund strategies and their success in exploiting profit opportunities during bubbles. Finally, it is summarized which arguments support each of the viewpoints.
Download or read book Stock Prices written by YenHsiao Chen and published by . This book was released on 2008 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Anatomy Of Stock Market Bubbles written by György Komáromi and published by ICFAI Books. This book was released on 2006-11-14 with total page 129 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book presents one of the most controversial happenings in economics stock market bubbles. The author discusses this topic threadbare and provides a critical analysis of related literature from different economic schools. This book also presents analy
Download or read book The Stock Market Bubbles Volatility and Chaos written by G.P. Dwyer and published by Springer Science & Business Media. This book was released on 2013-03-09 with total page 206 pages. Available in PDF, EPUB and Kindle. Book excerpt: Gerald P. Dwyer, Jr. and R. W. Hafer The articles and commentaries included in this volume were presented at the Federal Reserve Bank of St. Louis' thirteenth annual economic policy conference, held on October 21-22, 1988. The conference focused on the behavior of asset market prices, a topic of increasing interest to both the popular press and to academic journals as the bull market of the 1980s continued. The events that transpired during October, 1987, both in the United States and abroad, provide an informative setting to test alter native theories. In assembling the papers presented during this conference, we asked the authors to explore the issue of asset pricing and financial market behavior from several vantages. Was the crash evidence of the bursting of a speculative bubble? Do we know enough about the work ings of asset markets to hazard an intelligent guess why they dropped so dramatically in such a brief time? Do we know enough to propose regulatory changes that will prevent any such occurrence in the future, or do we want to even if we can? We think that the articles and commentaries contained in this volume provide significant insight to inform and to answer such questions. The article by Behzad Diba surveys existing theoretical and empirical research on rational bubbles in asset prices.
Download or read book Investors and their Behavior during the South Sea Bubble written by Maike Lux and published by GRIN Verlag. This book was released on 2017-09-18 with total page 21 pages. Available in PDF, EPUB and Kindle. Book excerpt: Document from the year 2016 in the subject Business economics - Banking, Stock Exchanges, Insurance, Accounting, grade: 1,6, University of Paderborn (Wirtschaftswissenschaften), course: Unternehmenspolitik im internationalen Kontext, language: English, abstract: In this essay I will examine the investor behavior during the South Sea Bubble around 1720 and the involved South Sea Company. Nearly 300 years ago at the London Stock Exchange formed an enormous speculative bubble. In the eighteenth century the trade brought exotic products, such as commodities and slaves with exorbitant profits. This benefited appropriate commercial companies like the trading company South Sea Company. Its share price exploded from 120 to 950 pounds. Trigger of the former stock market crash: The South Sea Company did not have enough cash to pay overdue dividends. Therefore, I will try to reflect the investor behaviour at that time to maintain more information about why they act like they act. Additionally, I want to give a small outlook on equity valuation the time of the South Sea Bubble. My intent is not to deliver a detailed calculation of shares, rather to investigate the valuation at that time and thus to represent the theory of the pricing relationship. Second it should demonstrate the purpose of the subscription finance and its implementation. In 1720 and the later eighteenth century subscription finance was one of the great legal and political debates. Therefore, for this article it’s important to give information about subscription shares and the historical background, before investigate the legal and political history of the South Sea Company and to give a context to the eighteen-century for subscription finance and the South Sea Company. Deducted from this information, the paper will thus investigate what kind of investor behaviour was common and it will try to answer the question if this behaviour was rational or irrational. What different investor strategies can be found in this period and during the bubble, regarding the question which explanations can be found to explain the phenomenon when market prices deviate from fundamental values. Additionally, why investors act how they act settled in an overloaded stock market. Therefore, the paper focuses on one of the most famous bubbles, that associated with the rise and fall of the South Sea Company during 1720. [...]
Download or read book Stock market Psychology written by Karl Erik W‹rneryd and published by Edward Elgar Publishing. This book was released on 2001-01-01 with total page 360 pages. Available in PDF, EPUB and Kindle. Book excerpt: 'Stock-Market Psychology gives an excellent overview of the state-of-the-art literature on this subject in the fields of economics, psychology and finance. . . a comprehensive overview of the behavior of investors in the stock market. As such, this book is valuable for the classroom. . . Stock-Market Psychology provides researchers with numerous ideas for future research and readers with useful and fun tips without taking away our hopes of ever becoming rich from investing in stocks. What more is there to ask from a book?' - Joost M.E. Pennings, Journal of Economic Psychology 'George Goodman (Adam Smith) once wrote, "you can find out who you are by investing in the stock market, but it will be an expensive lesson". It is far smarter and cheaper to read Wärneryd's book instead. At a time when global stock markets are driven by emotions and passions, and are highly volatile, Chapter Six will tell you why, far better than a hundred analysts' reports.' - Shlomo Maital, TIM-Technion Institute of Management and the Samuel Neaman Institute for Advanced Studies in Science and Technology, Israel The rationale behind how people value and trade stocks is of unparalleled interest to governments, companies and other participants in stock markets. The book focuses on the way in which investors process information and form expectations about future gains. It argues that humans fall short of the perfect information processing required by theory, and that their expectations are based on more than just future company earnings.
Download or read book Asset Price Bubbles written by William Curt Hunter and published by MIT Press. This book was released on 2005 with total page 650 pages. Available in PDF, EPUB and Kindle. Book excerpt: A study of asset price bubbles and the implications for preventing financial instability.
Download or read book A Random Walk Down Wall Street The Time Tested Strategy for Successful Investing Ninth Edition written by Burton G. Malkiel and published by W. W. Norton & Company. This book was released on 2007-12-17 with total page 454 pages. Available in PDF, EPUB and Kindle. Book excerpt: Updated with a new chapter that draws on behavioral finance, the field that studies the psychology of investment decisions, the bestselling guide to investing evaluates the full range of financial opportunities.
Download or read book Do Stock Price Bubbles Influence Corporate Investment written by Simon Gilchrist and published by . This book was released on 2004 with total page 60 pages. Available in PDF, EPUB and Kindle. Book excerpt: Building on recent developments in behavioral asset pricing, we develop a model in which dispersion of investor beliefs under short-selling constraints drives a firm's stock price above its fundamental value. Managers optimally respond to the stock market bubble by issuing new equity. The bubble reduces the user-cost of capital and increase real investment. Using the variance of analysts' earnings forecasts as a proxy for the dispersion of investor beliefs, we find strong empirical support for the model's key prediction that increases in dispersion cause increases in new equity issuance, Tobin's Q, and real investment.
Download or read book NBER Macroeconomics Annual written by and published by . This book was released on 1986 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Speculation Trading and Bubbles written by José A. Scheinkman and published by Columbia University Press. This book was released on 2014-07-08 with total page 137 pages. Available in PDF, EPUB and Kindle. Book excerpt: As long as there have been financial markets, there have been bubbles—those moments in which asset prices inflate far beyond their intrinsic value, often with ruinous results. Yet economists are slow to agree on the underlying forces behind these events. In this book José A. Scheinkman offers new insight into the mystery of bubbles. Noting some general characteristics of bubbles—such as the rise in trading volume and the coincidence between increases in supply and bubble implosions—Scheinkman offers a model, based on differences in beliefs among investors, that explains these observations. Other top economists also offer their own thoughts on the issue: Sanford J. Grossman and Patrick Bolton expand on Scheinkman's discussion by looking at factors that contribute to bubbles—such as excessive leverage, overconfidence, mania, and panic in speculative markets—and Kenneth J. Arrow and Joseph E. Stiglitz contextualize Scheinkman's findings.
Download or read book Can the Theory of Behavioral Finance Depict the Reality on Stock Markets and Does it Contribute to the Progression in the Capital Market Theory written by STEPHAN. SCHEBITZ HOPPE (CARINA ANNA.) and published by Grin Publishing. This book was released on 2018-01-16 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt: Seminar paper from the year 2015 in the subject Business economics - Investment and Finance, grade: 1,7, University of Applied Sciences Essen, language: English, abstract: "The Portfolio Theory" by Harry Markowitz, the "Capital Asset Pricing Model" by William Sharpe and the concept of the "Homo Oeconomicus" of Adam Smith - all of these models that are taught to business students and referred to by financial specialists all over the world are based on the assumption of the fundamental efficiency of markets. Market analysts build their substantial economic and financial predictions on the supposition that investors and corporations always behave and decide rationally. Consequently there would not be a chance that manias, panics or crashes ever occur. Nevertheless there were various speculation bubbles in the past such as the 1929 Stock-market-crash, the Dot-com bubble starting 1997 and the US-Subprime crisis as of 2007. So stock prices show fluctuations that cannot be only elucidated by economic factors. Moreover there are studies that come to the conclusion that there is only a low correlation between share prices and fundamental data. Concomitant new research approaches deployed that either developed the existing models further or even created a complete paradigmatic change. Nowadays when it comes to explaining the occurrences on the stock markets the field of psychology and the behavioral science gain in relevance. However the following question arises: Can the theory of Behavioral Finance depict the reality on stock markets and its participants and does it make a contribution for the progression in the Capital Market Theory? Yet there are some approaches that attempted to answer this question but there is no scientific consensus about it. Hence this term paper should accomplish a concise but fundamental contribution for the contemplation of this topic.
Download or read book Behavioral Corporate Finance written by Hersh Shefrin and published by College Ie Overruns. This book was released on 2017-04-16 with total page 300 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Efficiency and Anomalies in Stock Markets written by Wing-Keung Wong and published by Mdpi AG. This book was released on 2022-02-17 with total page 232 pages. Available in PDF, EPUB and Kindle. Book excerpt: The Efficient Market Hypothesis believes that it is impossible for an investor to outperform the market because all available information is already built into stock prices. However, some anomalies could persist in stock markets while some other anomalies could appear, disappear and re-appear again without any warning. A Special Issue on "Efficiency and Anomalies in Stock Markets" will be devoted to advancements in the theoretical development of market efficiency and anomaly in the Stock Market, as well as applications in Stock Market efficiency and anomalies.
Download or read book Valuation written by McKinsey & Company Inc. and published by John Wiley & Sons. This book was released on 2010-07-16 with total page 860 pages. Available in PDF, EPUB and Kindle. Book excerpt: The number one guide to corporate valuation is back and better than ever Thoroughly revised and expanded to reflect business conditions in today's volatile global economy, Valuation, Fifth Edition continues the tradition of its bestselling predecessors by providing up-to-date insights and practical advice on how to create, manage, and measure the value of an organization. Along with all new case studies that illustrate how valuation techniques and principles are applied in real-world situations, this comprehensive guide has been updated to reflect new developments in corporate finance, changes in accounting rules, and an enhanced global perspective. Valuation, Fifth Edition is filled with expert guidance that managers at all levels, investors, and students can use to enhance their understanding of this important discipline. Contains strategies for multi-business valuation and valuation for corporate restructuring, mergers, and acquisitions Addresses how you can interpret the results of a valuation in light of a company's competitive situation Also available: a book plus CD-ROM package (978-0-470-42469-8) as well as a stand-alone CD-ROM (978-0-470-42457-7) containing an interactive valuation DCF model Valuation, Fifth Edition stands alone in this field with its reputation of quality and consistency. If you want to hone your valuation skills today and improve them for years to come, look no further than this book.
Download or read book Stabilizing an Unstable Economy written by Hyman P. Minsky and published by McGraw Hill Professional. This book was released on 2008-05-01 with total page 433 pages. Available in PDF, EPUB and Kindle. Book excerpt: “Mr. Minsky long argued markets were crisis prone. His 'moment' has arrived.” -The Wall Street Journal In his seminal work, Minsky presents his groundbreaking financial theory of investment, one that is startlingly relevant today. He explains why the American economy has experienced periods of debilitating inflation, rising unemployment, and marked slowdowns-and why the economy is now undergoing a credit crisis that he foresaw. Stabilizing an Unstable Economy covers: The natural inclination of complex, capitalist economies toward instability Booms and busts as unavoidable results of high-risk lending practices “Speculative finance” and its effect on investment and asset prices Government's role in bolstering consumption during times of high unemployment The need to increase Federal Reserve oversight of banks Henry Kaufman, president, Henry Kaufman & Company, Inc., places Minsky's prescient ideas in the context of today's financial markets and institutions in a fascinating new preface. Two of Minsky's colleagues, Dimitri B. Papadimitriou, Ph.D. and president, The Levy Economics Institute of Bard College, and L. Randall Wray, Ph.D. and a senior scholar at the Institute, also weigh in on Minsky's present relevance in today's economic scene in a new introduction. A surge of interest in and respect for Hyman Minsky's ideas pervades Wall Street, as top economic thinkers and financial writers have started using the phrase “Minsky moment” to describe America's turbulent economy. There has never been a more appropriate time to read this classic of economic theory.
