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Encyclopedia > Share price

In economics and financial theory, analysts use random walk techniques to model behavior of asset prices, in particular share prices on stock markets, currency exchange rates and commodity prices. This practice has its basis in the presumption that investors act rationally and without bias, and that at any moment they estimate the value of an asset based on future expectations. Under these conditions, all existing information affects the price, which changes only when new information comes out. By definition, new information appears randomly and influences the asset price randomly. Face-to-face trading interactions on the New York Stock Exchange trading floor. ... Finance theory is the field that deals with investment making decisions and the concept of the time value of money. ... Example of eight random walks in one dimension starting at 0. ... This article is about the business definition. ... In economics and business, the price is the assigned numerical monetary value of a good, service or asset. ... For other uses, see Stock (disambiguation). ... A stock exchange is an organization of which the members are stock brokers. ... In finance, the exchange rate (also known as the foreign-exchange rate, forex rate or FX rate) between two currencies specifies how much one currency is worth in terms of the other. ... This article does not cite any references or sources. ... Homo economicus, or Economic man, is a term used for an approximation or model of homo sapiens that acts to obtain the highest possible well-being for himself given available information about opportunities and other constraints, both natural and institutional, on his ability to achieve his predetermined goals. ... In general, the economic value of something is how much a product or service is worth to someone relative to other things (often measured in money). ...

Empirical studies have demonstrated that prices do not completely follow random walks. Low serial correlations (around 0.05) exist in the short term, and slightly stronger correlations over the longer term. Their sign and the strength depend on a variety of factors. Autocorrelation is a mathematical tool used frequently in signal processing for analysing functions or series of values, such as time domain signals. ...

Researchers have found that some of the biggest price deviations from random walks result from seasonal and temporal patterns. In particular, returns in January significantly exceed those in other months (January effect) and on Mondays stock prices go down more than on any other day. Observers have noted these effects in many different markets for more than half a century, but without succeeding in giving a completely satisfactory explanation for their persistence. The January effect (sometimes called year-end effect) is an unexplained financial phenomenon of most stock markets having significantly higher returns in January than in other months of the year. ...

Technical analysis uses most of the anomalies to extract information on future price movements from historical data. But some economists, for example Eugene Fama, argue that most of these patterns occur accidentally, rather than as a result of irrational or inefficient behavior of investors: the huge amount of data available to researchers for analysis allegedly causes the fluctuations. Technical analysis is the study of market action, primarily through the use of charts, for the purpose of forecasting future price trends. ... Eugene F. Fama. ...

Another school of thought, behavioral finance, attributes non-randomness to investors' cognitive and emotional biases. Economics Nobel Laureate Daniel Kahneman, was an important figure in the development of behavioral finance and economics and continues to write extensively in the field. ...

  Results from FactBites:
Share price (83 words)
Each NV ordinary share (or depositary receipt of ordinary share) of € 0.16 represents the same underlying economic interest in the Unilever Group as each PLC ordinary share of 3 1/9 pence (safe for exchange rate fluctuations).
Unilever NV ordinary shares or depositary receipts of ordinary shares are listed on the Euronext Amsterdam and as New York registry shares on the New York Stock Exchange.
Unilever PLC shares are listed on the London Stock Exchange and in New York as American Depositary Receipts.
Share price - definition of Share price in Encyclopedia (335 words)
In economics and financial theory, random walk is used to model behavior of asset prices, in particular share prices on stock markets, currency exchange rates and commodity prices.
This is based on presumptions that investors are rational and unbiased and at any moment they estimate the value of the asset based on future expectations.
Most of the anomalies are used in technical analysis to extract information on future price movements from past history.
  More results at FactBites »



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