FIN.W4
Instructions
Determine whether stock prices are affected more by long-term or short-term performance. Provide one (1) example of the effect that supports your claim.Value a share of TFCs stock using a growth model method and compare that value to the current trading price of a share of TFC. Determine whether the stock is undervalued or overvalued. Provide a rationale for your response.
Answer
Stock Movements in the Short-run and in the Long-runShares can either be affected in the short-term or the long-term depending on different internal or external factors. Supply and demand is the basic factor that affects stock prices both in the short term and in the long term (Bodie, Kane, & Marcus, 2014). There are quite a number of factors that affect the prices of shares in the short-term such as risk changes, rumors and news, economic climate (inflation, interest rates, and policy), buyer and seller reactions, taxes, and index changes. Over time, changes of share prices in the short-term are smoothed out. In the long-run, market reaction and news become less significant. The key factors that drive change in share prices are earnings and growth (Bodie, Kane, & Marcus, 2014). Th...
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