Question: Analysis of stock market eras over the past 50 years
Analysis of stock market eras over the past 50 years shows that inflation was the single most important driver of total returns to shareholders (TRS) for the market as a whole. Discuss why inflation has such a strong impact on share prices. (Use the value driver model.)
Answer to relevant QuestionsWhy are differences in companies’ value creation more apparent from comparing their market-value-to-capital multiples than their market-valueto- earnings multiples? Fundamentals explain less of the variation in TRS than in market-valueto- book-value or market-value-to-earnings ratios (as measured by the R2 shown in Exhibits 15.7 and 15.10). This holds true even when TRS is measured over ...As a rule, cross-listings for companies with a home listing in a mature capital market do not offer material benefits. Discuss how and why this might be different for companies based in emerging capital markets. Discuss the pros and cons of introducing regulatory restrictions on short selling in an equity market. Assuming that fundamental investors ultimately set a company’s share price, name two reasons why you could still expect the price to show significant volatility.
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