Stock prices dynamics
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We are looking at models in finding fair values of stock which may leave the impression that stock prices should not change much. As of late there have been large shifts in the prices of stock in the stock market, what do you think makes the prices of stock by firms change so much? Include what you think proves your opinion or position.
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Solution Summary
The short response provides an explanation to a few factors that cause stock prices to swing wildly. The response analyzes some of the factors that play a role in determining the stock price beyond the present value of future cash flows.
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The prices of stocks cannot be predicted with accuracy. They are based on several factors. The fundamental way to price stock is by determining the present value of long term cash flows. However, there are a number of assumptions that go into developing a cash flow model for a price of the stock. For example, future year cash flows, future earnings, expenses, capital ...
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