THE IMPACT OF ASSET IMPAIRMENTS ON STOCK PRICE The first two of these are not particularly plausible. I present strong evidence, in
Table 1.2 and in Appendix A, that the district-level choice index is an important determinant
of student stratification, even when possible confounding factors are controlled.
Many of the same organizations who provided me with data for the first edition of Stocks for the Long Run willingly updated their data for this second edition. I include Lipper Analytical Services and the Vanguard Group for their mutual funds data, Morgan Stanley for their Capital Market indexes,
Smithers & Co. for their market value data and Bloomberg Financial for their graphic representations.
Bài giảng Chapter 1: Overview of Financial Management and the Financial Environment present of Financial management (Forms of business organization, Objective of the firm Maximize wealth, Determinants of stock pricing) and The financial environment (Financial instruments, markets and institutions, Interest rates and yield curves).
In chapter 8, we turn to the other major source of fi nancing for corporations: common and preferred stock. After studying this chapter you will be able to understand: How stock prices depend on future dividends and dividend growth, the different ways corporate directors are elected to office, how the stock markets work.
Using the panel-data approach of Kónya (2006), which is based on SUR systems and Wald
tests with country-specific bootstrap critical values, and two different (weekly and monthly)
datasets covering respectively the periods from 7 June 2005 to 21October 2008, and from
January 1996 to December 2007, we show strong statistical evidence that the causal
relationship is consistently bi-directional for Saudi Arabia. In the other GCC countries, stock
market price changes do not Granger cause oil price changes, whereas oil price shocks
Granger cause stock price changes.
The regression results also imply that expected inflation has a substantial effect on
expected long-run real equity returns. In other words, in addition to the negative effect on stock
prices associated with its effect on expected earnings, higher expected inflation also raises long-
run required returns. Roughly speaking, a one percentage point increase in expected inflation
increases required long-run real stock returns about a percentage point; equivalently, it reduces
the current price of stocks about 20 percent.
As for the effect of macroeconomic variables such as money supply and
interest rate on stock prices, the efﬁcient market hypothesis suggests that
competition among the proﬁt-maximizing investors in an efﬁcient market
will ensure that all the relevant information currently known about changes
in macroeconomic variables are fully reﬂected in current stock prices, so
that investors will not be able to earn abnormal proﬁt through prediction of
the future stock market movements (Chong and Koh 2003).
The traditional view that expected nominal rates of return on assets should move one-for-
one with expected inflation is first attributed to Irving Fisher (1930). Financial economists have
also argued that, because stocks are claims on physical, or “real”, assets, stock returns ought to
co-vary positively with actual inflation, thereby making them a possible hedge against
The purpose of this paper is to evaluate if Önancial asset prices and, in par-
ticular, sectoral stock prices can help to predict real economic growth. The study
is applied to euro area Önancial market prices and real economic growth over the
sample 1973 to 2006. The evaluation of the predictive power between the Önan-
cial assets is based on the relative improvements in the Mean Square Forecast
Errors (MSFE) compared to the MSFE of a simple optimal autoregressive (AR)
model, in an out-of-sample forecasting exercise.
Our findings also suggest that the economic importance of options’ incentive effects is small.
The size and accuracy of our data set enable sufficiently precise measurement to find compelling
statistical evidence that there is an effect. However, the size of the effect is such that ordinary
option grants have only small impacts on firm risk. Moreover, our tests of stock-price response to
option-induced risk-taking find no evidence of costs or benefits to shareholders from this activity.
In this chapter, you will learn: Describe how stock prices are determined and what stock markets do, apply the concept of present value to the fundamental elements of stock prices and describe how prices can get out of line with their fundamental value, explain that bankruptcy is an important feature in corporate business but that many of the bankruptcies of 2001 and 2002 involved a level of deception on the part of their accountants that was potentially quite damaging.
In this chapter, the following content will be discussed: Stock valuation methods, determining the required rate of return to value stocks, factors that affect stock prices, role of analysts in valuing stocks, stock risk, applying value at risk, applying value at risk, stock performance measurement, stock market efficiency.