Panel data regression methods have been used to explain factors affecting the stock pricing of the company. Regression result indicates that price earnings ratio, return on assets, and Oil Prices have a positive impact on company stock prices, while inflation has a negative impact on company stock prices.
Full Answer
How does the stock market affect corporate decision-making?
But Wharton research shows that this is not the end of the road for the stock market’s impact; how the stock reacts in turn affects a company’s decision-making in a sort of feedback loop. And when corporate decisions are informed by the market, it leads to a higher market value for the firm.
How does information in financial markets increase the value of firms?
The second layer is that information in financial markets increases the value of firms. Because when there is more information in financial markets, managers, directors, employees and so on can make more informed decisions, which will increase the value of the firm. Take these two layers together.
How does the stock market reflect the real world?
The stock market is seen as a reflection of what happens in the real world: A company releases poor earnings results and its stock price tanks, or shares rise if the firm becomes an acquisition target.
Is corporate governance related to firm financial performance?
This affirms why corporate governance mechanisms can be considered related to the financial performance of firms. Over the past decades, there have been many academic researchers investigating links between corporate governance and firm financial performance.
How company performance affect stock price?
The financial performance of a company is one of the most important factors affecting stock prices. If the company generates sufficient profits and that is higher than the period before, many investors will be interested in buying shares and this increases stock price (Lee & Zhao, 2014).
What factors affect a stock's price?
Factors that can affect stock pricesnews releases on earnings and profits, and future estimated earnings.announcement of dividends.introduction of a new product or a product recall.securing a new large contract.employee layoffs.anticipated takeover or merger.a change of management.accounting errors or scandals.
Does the price of a stock always directly relate to the company's performance?
Stocks don't just trade on a company's performance. They trade on expectations, typically reflected in the company's price-earnings ratio, or P/E ratio. The P/E ratio is the current stock price divided by its earnings. When expectations are high, the stock commands a higher P/E ratio.
What are the three factors or aspects which influences the stock price of a company?
Supply and demand, company financial performance and broad economic trends are three factors that affect the market value of stocks.
What determines a company's stock price?
After a company goes public, and its shares start trading on a stock exchange, its share price is determined by supply and demand for its shares in the market. If there is a high demand for its shares due to favorable factors, the price will increase.
What are the drivers of stock prices?
The 3 key stock price drivers are earnings, dividends and valuation....Top Three Stock Price DriversEarnings. The first major component of a company's valuation is its earnings. ... Dividends. An essential part of a company's valuation comes from its dividend income stream. ... Valuation.
Do companies care about stock price?
All publicly-traded companies care about their stock price. The reasons why they care differ from company to company. The stock price is considered a proxy for the financial health and future prospects of a company and therefore also as a reflection of the performance of the company's management and board of directors.
How does company benefit from higher stock price?
Higher stock price means fewer shares are paid for the same cash value. Attracts Investors: A higher share price increases the interest of customers because they expect a greater return from your company. Earns Employee's Trust: Companies with increasing stock prices have a tendency to attract better quality employees.
How do you determine a stock price increase?
When the demand for a stock exceeds supply, there will be a rise in the price of a stock. The more drastic the demand-supply gap, the higher the price. For example, when many traders are buying stock X, stock X's price per share will increase and the same is true vice-versa.
Is financial performance reflected in stock prices?
Stock returns are used to measure the performance of a company stock. The financial objective of the firm is maximizing investment returns, which are reflected by the change in the company stock prices. Financial performance of a company is measured using stock returns.
What is the most important factor that affects the value of a company?
Income is a major factor in the valuation of any business. Particularly, someone appraising the value of a business will look at historical trends in your income.
Summary
Predicting stock price remains one of the challenges for investors' investment strategies. This study helps with accurate prediction and the main factors affecting variations in stock prices.
1 INTRODUCTION
The positive economic growth in the United Arab Emirates (UAE) in the last three decades has fascinated many investors. However, investors face a challenge of predicting stock prices in their investment strategies; hence, tools that can provide them with accurate information about the stock price are crucial.
3 RESEARCH METHODOLOGY AND ANALYSIS
The architecture used for this methodology is shown in Figure 1. It is divided into four phases: (a) data collection, (b) data preprocessing, (c) ANFIS, and (d) performance analysis.
4 RESULTS AND DISCUSSIONS
Figure 3 shows the prediction of 1,160 stock market prices used in building, training, and cross-checking the neuro-fuzzy model. In Figure 3, four performance measures are found to have a visible impact on changes in the stock prices over the 5 years, as they show a remarkably close relationship between actual and predicted stock prices.
5 CONCLUSIONS
Accurate stock price prediction is one of the great challenges for investors. There have been many tools and models proposed to help investors in making the right investment decision in stocks. This study employed an NFS to predict the stock price and determine the main factors affecting the variations in the UAE stock exchange.
The Tables
TABLE A1. Different artificial neural network (ANN) methods used in stock market forecasting
Correlation Analysis
Alavala, C. R. ( 2008 ). Fuzzy Logic and Neural Networks: Basic Concepts and Applications. Delhi, India: New Age International Pvt Ltd.