Over the past five years, the highest share price for Google was around $700 and its lowest price was around $175. Exxon’s highest and lowest share prices over the same period were $94 and $32. Do such wide ranges mean that the stock market is reflecting emotions more than fundamentals?
Answer to relevant QuestionsDiscuss the possible factors underlying differences in price for the same stock on two different markets, such as the spread between the London and New York prices for a share of Shell’s common equity stock. Why do executives spend so much time and effort on communicating with noise traders if intrinsic investors ultimately drive a company’s share price? 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. What are the benefits to society when a business is owned by its best owner? What would it take for an acquisition to increase the acquirer’s value by 10 percent? Give your answer in terms of size of deal, value of improvements, and premium paid.
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