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Valuing Stocks L1Sx
Valuing Stocks L1Sx
Initial Public Offering (IPO) : First offering of stock to the general public.
Moving Avarage (MO): Statistical moving avarage of the close prices in a given
period. In case the close prices cuts upper the MO signals buy; otherwise sell
Commodity Channel Index: Shows the upper and lower deviations from
statistical avarage and helps to follow cash flows to the stock. If it is below -100
signals buy; if it is over +100 signals sell.
Reading the Stock Market Listings
Book Value: Net Worth of the Firm according to the Balance Sheet
Market Value: is the amount that investors are willing to pay for the
shares of the firm.
Market price need not, and generally does not, equal either book
value or liquidation value. Unlike market value, neither book value nor
liquidation value treats the firm as a going concern.
Div1 + P1 – P0
Expected Return = r =
P0
Valuing Common Stocks
Div1 P1 – P0
+
P0 P0
Expected Return
Valuing Common Stocks
Dividend Discount Model
Computation of today’s stock price which states that share value
equals the present value of all expected future dividends.
H - Time horizon for your investment.
The value of a stock is the present value of the dividends it will pay
over the investor’s horizon plus the present value of the expected
stock price at the end of that horizon
Valuing Common Stocks
Dividend Discount Model
With no Growth P0 = DIV1
r
DIV1
With Constant Growth P0 =
r-g
Expected rates of return = dividend yield + growth rate
Technical Analysis:
Investors who attempt to identify undervalued stocks
by searcing for patterns in past stock prices
Fundamental Analysis:
Investors who attempt to to find mispriced securities
by analyzing fundamental information, such as accountiing
data and business prospects.
Efficient Market : Market in which prices reflect all avaliable information
ISTANBUL