Question: Assuming investors had perfect foresight how would the volatility of
Assuming investors had perfect foresight, how would the volatility of a cyclical company’s share price compare to the volatility of its profits?
Answer to relevant QuestionsWhat is the relationship between the stock market and the real economy in terms of measures such as gross domestic product (GDP), inflation, and interest rates? How should a company decide which risks to hold and which to hedge? What is the expectations treadmill and how does it affect managers’ ability to deliver above-average TRS over long periods of time? Describe how analyst projections of cyclical company profits compare to actual performance. What are the possible reasons for the deviation? Why is maturity mismatch important for understanding a bank’s risk and analyzing its performance?
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