Does the Stock Market Rationally Reflect Fundamental Values?: Discussion

1986 ◽  
Vol 41 (3) ◽  
pp. 601 ◽  
Author(s):  
Robert F. Stambaugh
Keyword(s):  
Stock Market ◽  
Fundamental Values

Does the Stock Market Rationally Reflect Fundamental Values?

1986 ◽  
Vol 41 (3) ◽  
pp. 591-601 ◽  
Author(s):  
LAWRENCE H. SUMMERS
Keyword(s):  
Stock Market ◽  
Fundamental Values

scholarly journals The stock market bubble of 1929: evidence from clsoed-end mutual funds

1991 ◽  
Vol 51 (3) ◽  
pp. 675-700 ◽  
Author(s):  
J. Bradford De Long ◽  
Andrei Shleifer
Keyword(s):  
Stock Market ◽  
Mutual Funds ◽  
Market Value ◽  
Late Summer ◽  
Asset Values ◽  
The Difference ◽  
Fundamental Value ◽  
Fundamental Values

Economists directly observe warranted “fundamental” values in only a few cases. One is that of closed-end mutual funds: their fundamental value is simply the current market value of the securities that make up their portfolios. We use the difference between prices and net asset values of closed-end mutual funds at the end of the 1920s to estimate the degree to which the stock market was overvalued on the eve of the 1929 crash. We conclude that the stocks making up the S & P composite were priced at least 30 percent above fundamentals in late summer, 1929.

scholarly journals Interactions between the Real Economy and the Stock Market: A Simple Agent-Based Approach

2012 ◽  
Vol 2012 ◽  
pp. 1-21 ◽  
Author(s):  
Frank Westerhoff
Keyword(s):  
Stock Market ◽  
Economic Activity ◽  
Real Economy ◽  
Agent Based ◽  
The Real ◽  
Goods Market ◽  
Numerical Tools ◽  
Market Approach ◽  
Fundamental Values

We develop a simple behavioral macromodel to study interactions between the real economy and the stock market. The real economy is represented by a Keynesian-type goods market approach while the setup for the stock market includes heterogeneous speculators. Using a mixture of analytical and numerical tools we find, for instance, that speculators may create endogenous boom-bust dynamics in the stock market which, by spilling over into the real economy, can cause lasting fluctuations in economic activity. However, fluctuations in economic activity may, by shaping the firms' fundamental values, also have an impact on the dynamics of the stock market.

scholarly journals Relative Versus Fundamental Valuation: An Empirical Study of US Biotechnology Firms Around the 2000 High-Tech Bubble

2020 ◽  
Vol 11 (6) ◽  
pp. 226
Author(s):  
Dzung Viet Nguyen
Keyword(s):  
Stock Market ◽  
Firm Valuation ◽  
High Tech ◽  
Biotechnology Firms ◽  
Residual Income Model ◽  
Relative Value ◽  
Before And After ◽  
Fundamental Value ◽  
Income Model ◽  
Fundamental Values

This study is related to the issue of whether the stock market reflects the fundamental value of high-tech firms around the 2000 high-tech bubble. We extend the literature on firm valuation by exploiting the conceptual difference between intrinsic and relative values. We apply the residual income model and valuation multiples to estimate these two values respectively and make a comparison for a sample of biotechnology firms. Under realistic assumptions, it seems that estimated fundamental values of these firms fail to be reflected by the stock market. Their market valuation is rather based on relative value for both periods before and after the fall of high-tech stocks.

Can Noise Traders Cause Persistent Deviations from Fundamental Values on the Stock Market? / Können Noise Trader langfristige Abweichungen der Aktienkurse von ihren Fundamentalwerten bewirken?

1999 ◽  
Vol 219 (5-6) ◽  
Author(s):  
Mathias Binswanger
Keyword(s):  
Stock Market ◽  
Future Development ◽  
Stock Prices ◽  
Rational Expectations ◽  
Price Volatility ◽  
High Price ◽  
Noise Traders ◽  
Noise Trader ◽  
Fundamental Value ◽  
Fundamental Values

SummaryModels which are built on the assumption of rational expectations can easily outline the conditions under which bubbles may exist but they remain silent on the factors that cause the price to deviate from the fundamental value. In this paper it is argued that dynamic extensions of the noise trader model of De Long et al. (1990a) may provide a behavioral explanation of persistent deviations of stock prices from their fundamental value if changing fundamentals and especially fundamental shocks are included. As a consequence the pattern and the sustainability of bubbles also depend on noise traders’ reaction to fundamental shocks. In the multi period extension of the noise trader model developed in the paper noise traders’ behavior is captured by two components. First, there is a fundamentally unwarranted optimism about the future development of dividends independent of the recent development of fundamentals. Second, noise traders overreact to an average of recent dividend shocks, which results in waves of optimism or pessimism that create high price volatility. The model shows that sustainable bubbles are slowly growing, while large overreactions to fundamental shocks will result in fast growing but frequently bursting bubbles.

Predicting Stock Market Performance

2020 ◽  
pp. 1-10
Author(s):  
Thomas Plieger ◽  
Thomas Grünhage ◽  
Éilish Duke ◽  
Martin Reuter
Keyword(s):  
Stock Market ◽  
Risk Taking ◽  
Life Stress ◽  
Price Volatility ◽  
Individual Characteristics ◽  
Self Report ◽  
Financial Behavior ◽  
Market Simulation ◽  
Stock Market Performance ◽  
Risk Taking Behavior

Abstract. Gender and personality traits influence risk proneness in the context of financial decisions. However, most studies on this topic have relied on either self-report data or on artificial measures of financial risk-taking behavior. Our study aimed to identify relevant trading behaviors and personal characteristics related to trading success. N = 108 Caucasians took part in a three-week stock market simulation paradigm, in which they traded shares of eight fictional companies that differed in issue price, volatility, and outcome. Participants also completed questionnaires measuring personality, risk-taking behavior, and life stress. Our model showed that being male and scoring high on self-directedness led to more risky financial behavior, which in turn positively predicted success in the stock market simulation. The total model explained 39% of the variance in trading success, indicating a role for other factors in influencing trading behavior. Future studies should try to enrich our model to get a more accurate impression of the associations between individual characteristics and financially successful behavior in context of stock trading.

Online collective emotion and Chinese stock market

2013 ◽  
Author(s):  
Hao Chen ◽  
Kai Sheng Lai
Keyword(s):  
Stock Market ◽  
Chinese Stock Market ◽  
Collective Emotion

Extrapolation, Efficiency, and Stock Market Overreaction

1989 ◽  
Author(s):  
Paul B. Andreassen
Keyword(s):  
Stock Market
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