Finance Memo
Autor: Cammy Vohra • October 11, 2015 • Presentation or Speech • 575 Words (3 Pages) • 786 Views
MEMO 03
To: Mr Chad Cheatem
Dewey, Cheatem & Howe Pty Ltd.
From: Mack, Donald & Burger
Audit Managers
Cook, Books & Hyde Pty Ltd.
Date: 25/09/2015
Re: Predicting the Share Price.
As requested by Mr. Chad Cheatem, I am going to review Semi-Strong Market efficiency hypothesis and Stock valuation Model. I will present my detail analysis and provide you my thoughts and opinion on the topic if is it possible for someone to develop similar type of models, which can consistently beat the market.
Based on the sound reasoning and experts informed opinion it is impossible for someone to develop such models that can beat the market consistently because in stock exchange market the current stock prices reflect not only the publicly available information about the value of firm but also some non-public information.
All in all, semi-strong form tests of effective markets models are worried with whether current cost "completely mirror" all clearly publicly accessible data. Every individual test, on the other hand, is worried with the alteration of security costs to one sort of data creating occasion (e.g., stock splits, declarations of budgetary reports by firms, new security issues, and so on.). A speculator can just get higher profit for the new data, when the market sector is inefficient or powerless. On the other hand, stock valuation is the method in which each share produces two types of cash flows; firstly the stock’s profits that are paid in a regular (e.g. annual) manner, and secondly the value of stock at the selling date. When the stock is preserved for a long period of time, the present value of future price reduces according to a time horizon and can reach to zero for a period of 50 to 100 years (Pandey, 2009). Hence, the price of a share today is the present value of an infinite stream of dividends also; there were a few scholastics researches about on the share's consistency value, which unraveled reality that investors may foresee the future cost of the Stock.
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