The assessment of the earnings to stock value ratio in line with inflation

2021 ◽  
Vol 14 (2) ◽  
pp. 218-240
Author(s):  
Aleksandr B. MOLOTKOV
Keyword(s):  
Stock Market ◽  
Risk Premium ◽  
Significant Positive Correlation ◽  
Price Ratio ◽  
Suggested Model ◽  
Expected Inflation ◽  
Stock Value ◽  
The Us ◽  
Fundamental Value ◽  
The Impact

Subject. The study discusses the dependence of estimates of the fundamental stock value (based on the earnings-price ratio) on the expected inflation. Objectives. I determine the type and parameters of such dependence. Methods. The research is based on methods for estimating the stock value and regression analysis to define the parameters of the suggested model. Results. For the US stock market (S&P 500 index), it is shown that earnings-price ratio for the earnings averaged over 10 years has a significant positive correlation with the indicator chosen to characterize the expected inflation. It is substantiated that the main reason is the impact of the expected inflation on the real determinants of the fundamental value, primarily on the risk premium. Conditions are formulated under which Gordon's formula can be used to determine the type of relationship between the fundamental stock value and its determinants for a time series of observations with a changing real discount rate. Conclusions. The model is suggested for estimating the fundamental stock value based on the linear relationship between the earnings-price ratio and inflation., and its parameters are determined. The adequacy of the model is confirmed empirically for the US stock market. The findings can complement investor’s decision-making methods in the stock market.

scholarly journals The estimation of inflation-adjusted earnings to stock value ratio

2021 ◽  
Vol 26 (1) ◽  
pp. 53-66
Author(s):  
Aleksandr B. MOLOTKOV
Keyword(s):  
Stock Market ◽  
Risk Premium ◽  
Significant Positive Correlation ◽  
Price Ratio ◽  
Suggested Model ◽  
Expected Inflation ◽  
Stock Value ◽  
The Us ◽  
Fundamental Value ◽  
The Impact

Subject. The study discusses the dependence of estimates of the fundamental stock value (based on the earnings-price ratio) on the expected inflation. Objectives. I determine the type and parameters of such dependence. Methods. The research is based on methods for estimating the stock value and regression analysis to define the parameters of the suggested model. Results. For the US stock market (S&P 500 index), it is shown that earnings-price ratio for the earnings averaged over 10 years has a significant positive correlation with the indicator chosen to characterize the expected inflation. It is substantiated that the main reason is the impact of the expected inflation on the real determinants of the fundamental value, primarily on the risk premium. Conditions are formulated under which Gordon's formula can be used to determine the type of relationship between the fundamental stock value and its determinants for a time series of observations with a changing real discount rate. Conclusions. The model is suggested for estimating the fundamental stock value based on the linear relationship between the earnings-price ratio and inflation., and its parameters are determined. The adequacy of the model is confirmed empirically for the US stock market. The findings can complement investor’s decision-making methods in the stock market.

The Impact of Monetary and Fiscal Policies on the Stock Market in the United States (U.S); Evidence from Linear ARDL Framework

2020 ◽  
Vol 11 (1) ◽  
pp. 132-132
Author(s):  
Aref Emamian
Keyword(s):  
United States ◽  
Stock Market ◽  
The United States ◽  
Real Effective Exchange Rate ◽  
Annual Data ◽  
Fiscal Policies ◽  
Long Run ◽  
The Us ◽  
Short Run ◽  
The Impact

This study examines the impact of monetary and fiscal policies on the stock market in the United States (US), were used. By employing the method of Autoregressive Distributed Lags (ARDL) developed by Pesaran et al. (2001). Annual data from the Federal Reserve, World Bank, and International Monetary Fund, from 1986 to 2017 pertaining to the American economy, the results show that both policies play a significant role in the stock market. We find a significant positive effect of real Gross Domestic Product and the interest rate on the US stock market in the long run and significant negative relationship effect of Consumer Price Index (CPI) and broad money on the US stock market both in the short run and long run. On the other hand, this study only could support the significant positive impact of tax revenue and significant negative impact of real effective exchange rate on the US stock market in the short run while in the long run are insignificant. Keywords: ARDL, monetary policy, fiscal policy, stock market, United States

scholarly journals Volatility Modeling: An Overview of Equity Markets in the Euro Area during COVID-19 Pandemic

Mathematics ◽  
2021 ◽  
Vol 9 (11) ◽  
pp. 1212
Author(s):  
Pierdomenico Duttilo ◽  
Stefano Antonio Gattone ◽  
Tonio Di Di Battista
Keyword(s):  
Stock Market ◽  
Euro Area ◽  
Risk Premium ◽  
Stock Markets ◽  
Market Volatility ◽  
Stock Market Volatility ◽  
Volatility Modeling ◽  
The Impact ◽  
Second Wave ◽  
Daily Returns

Volatility is the most widespread measure of risk. Volatility modeling allows investors to capture potential losses and investment opportunities. This work aims to examine the impact of the two waves of COVID-19 infections on the return and volatility of the stock market indices of the euro area countries. The study also focuses on other important aspects such as time-varying risk premium and leverage effect. This investigation employed the Threshold GARCH(1,1)-in-Mean model with exogenous dummy variables. Daily returns of the euro area stock markets indices from 4th January 2016 to 31st December 2020 has been used for the analysis. The results reveal that euro area stock markets respond differently to the COVID-19 pandemic. Specifically, the first wave of COVID-19 infections had a notable impact on stock market volatility of euro area countries with middle-large financial centres while the second wave had a significant impact only on stock market volatility of Belgium.

scholarly journals Loss aversion, overconfidence of investors and their impact on market performance evidence from the US stock markets

2020 ◽  
Vol 25 (50) ◽  
pp. 451-478
Author(s):  
Ahmed Bouteska ◽  
Boutheina Regaieg
Keyword(s):  
Stock Market ◽  
Economic Performance ◽  
Loss Aversion ◽  
Market Performance ◽  
Ordinary Least Squares ◽  
Company Performance ◽  
Service Firms ◽  
Content Type ◽  
The Us ◽  
The Impact

Purpose The current study aims to investigate the impacts of two behavioral biases, namely, loss aversion and overconfidence on the performance of US companies. First, the impact of loss aversion on the economic performance of companies was assessed. Second, the impact of overconfidence on market performance was discussed. Design/methodology/approach This study used around 6,777 quarterly observations on the population of US-insured industrial and services companies over the 2006-2016 period. Ordinary least squares (OLS) regression in two panel data models were used to test the hypotheses formulated for the study. Findings It was documented that the loss-aversion bias negatively affects the economic performance of companies and this is achieved for both sectors. In contrast, the findings suggest that overconfidence positively affects market performance of industrial firms but negatively affects market performance in service firms. Further robust evidence was found that overconfidence bias seems to be dominant, and hence, investors may tend to be more overconfident rather than more loss-averse. Originality/value This research can be extended by focusing on the following question: What is the impact of the contradictory (positive and negative) effects of an investor's loss aversion and overconfidence on the US company performance in case of realization of a stock market crisis or stock market crash?

scholarly journals The impact of the US stock market opening on price discovery of government bond futures

2019 ◽  
Vol 39 (7) ◽  
pp. 779-802 ◽  
Author(s):  
Ivan Indriawan ◽  
Feng Jiao ◽  
Yiuman Tse
Keyword(s):  
Stock Market ◽  
Price Discovery ◽  
Government Bond ◽  
Market Opening ◽  
The Us ◽  
The Impact ◽  
Bond Futures

scholarly journals Opportunity or Crisis? Volatility and Leverage Effect in the World’s Largest Economies

2019 ◽  
Vol 9 (4) ◽  
pp. 1
Author(s):  
Amalendu Bhunia ◽  
Devrim Yaman
Keyword(s):  
Stock Market ◽  
Stock Markets ◽  
Market Volatility ◽  
Future Market ◽  
Market Returns ◽  
Stock Market Returns ◽  
The Us ◽  
The World ◽  
The Impact ◽  
The Relationship

This paper examines the relationship between asset volatility and leverage for the three largest economies (based on purchasing power parity) in the world; US, China, and India. Collectively, these economies represent Int$56,269 billion of economic power, making it important to understand the relationship among these economies that provide valuable investment opportunities for investors. We focus on a volatile period in economic history starting in 1997 when the Asian financial crisis began. Using autoregressive models, we find that Chinese stock markets have the highest volatility among the three stock markets while the US stock market has the highest average returns. The Chinese market is less efficient than the US and Indian stock markets since the impact of new information takes longer to be reflected in stock prices. Our results show that the unconditional correlation among these stock markets is significant and positive although the correlation values are low in magnitude. We also find that past market volatility is a good indicator of future market volatility in our sample. The results show that positive stock market returns result in lower volatility compared to negative stock market returns. These results demonstrate that the largest economies of the world are highly integrated and investors should consider volatility and leverage besides returns when investing in these countries.

scholarly journals A structural break approach to analysing the impact of the QE portfolio balance channel on the US stock market

2019 ◽  
Vol 64 ◽  
pp. 204-220
Author(s):  
Imran Hussain Shah ◽  
Francesca Schmidt-Fischer ◽  
Issam Malki ◽  
Richard Hatfield
Keyword(s):  
Stock Market ◽  
Structural Break ◽  
Portfolio Balance ◽  
The Us ◽  
The Impact

scholarly journals Capital Asset Pricing Model, Theory and Practice: Evidence from USA (2009-2016)

2017 ◽  
Vol 12 (8) ◽  
pp. 182 ◽  
Author(s):  
Mohammad AbdelMohsen Al-Afeef
Keyword(s):  
Stock Market ◽  
Multiple Regression Model ◽  
Theory And Practice ◽  
Pricing Model ◽  
Stock Market Index ◽  
Market Return ◽  
Market Index ◽  
Stock Market Return ◽  
The Us ◽  
The Impact

This study discussed the Capital Assets Pricing model (CAPM) and its ability to measure the required return, the researcher tested this model on Amazon Company listed in S&P 500 during the period (2009-2016), to measure the impact of beta stock and market index return on the required return. Multiple regression model was used to test the effect of independent variables (Beta stock, Market Index Return) on the dependent variable (Required return), it should be noted that there is a statistically significant impact of the US stock market Return (S&P500) and Amazon stock Beta factor on Amazon stock required return, and the study model explanatory was 20% , this means that 20% of the changes in the required return are due to beta and market return, and 80% of the changes due to other factors, also find that CAPM can be applied on efficiency markets and huge companies.The researcher recommends applying the variables of the study on a group of large companies in the S&P 500 index, and looking for other factors that may affect the required return.

scholarly journals Using rival effects to identify synergies and improve merger typologies

2011 ◽  
Vol 9 (4) ◽  
pp. 310-335 ◽  
Author(s):  
Joseph A. Clougherty ◽  
Tomaso Duso
Keyword(s):  
Stock Market ◽  
Event Study ◽  
Methodological Approach ◽  
Horizontal Mergers ◽  
European Continent ◽  
Market Data ◽  
Merger Activity ◽  
The Us ◽  
Anglo American ◽  
The Impact

Differentiation of collusive and efficiency-based synergies in horizontal mergers has proven difficult. The authors propose a theory-backed methodological approach to classify mergers that yields greater information on merger types and merger effects. Moreover, the methodological approach distinguishes between mergers characterized largely by collusion-based synergies and those characterized largely by efficiency-based synergies. Crucial to the proposed method is that it considers the impact of merger events not only on merging firms, as is common in the literature, but also on non-merging rivals. The authors demonstrate how the proposed approach clarifies the nature of merger activity through an event-study procedure based on stock market data on samples of large horizontal mergers drawn from the US and UK (an Anglo-American sub-sample) and from the European continent the authors demonstrate how the proposed schematic clarifies the nature of merger activity.

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