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Essay / Research Paper Abstract
This 14 page paper discusses the validity of financial analysis is based on the assumption that markets efficiently reflect the underlying present value of the firm. This is examined using various theories such as efficient market hypothesis (EMH) and the Edwards-Bell-Ohlson models. This is considered generally and in the context of the stock market performance with peaks and troughs and the crash of high tech shares in 2000. The bibliography cites 22 sources.
Page Count:
14 pages (~225 words per page)
File: TS14_TEvalueshare.rtf
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Unformatted sample text from the term paper:
at explaining the movement of share prices has the foundation that financial analysis is based on the assumption that markets efficiently reflect the underlying present value of the firm. However,
there is a great deal of diversity when looking at how a firm is valued, should it by reference to the underling assets, the expected future income or a combination
of the two. However, despite many theories looking to establish a pattern or link between share price and perceived value, however it is approached there are others that argue that
financial analysis may be far more complex than any theory suggests, possibly even having no pattern to relationship the value of a firm.
There are many theories, one of the most popular is Famas Efficient Market Hypothesis (EMH). Efficient Market Hypothesis is a theory that was developed for the most part at
the University of Chicago. The theory is both a stand alone theory as well as forming an integral part of more complex ideas, such as Modern Portfolio Theory (Freeman, 2001).
Therefore, it can be argued there is some empirical proof, but this use, that the theory has some value to investors. However, this does not mean that it is an
accurate theory. To assess this we need to look at the theory. The basic idea is that it is not possible to beat market prices as the prices will
already include the relevant market information which look to the way the firm is valued for assets as well as perceived future income and influences on future earnings (Fama, 1965,
1991). The model states that, at any given point in time, the price of the stocks or securities, will reflect the information that is currently available about the stock
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