Sunday, October 3, 2010

Fundamental valuation efficiency

Asset prices reflect the expected past flows of payments associated with holding the assets (profit forecasts are correct, they attract investors)

Fundamental valuation involves lower risks and less profit opportunities. It refers to the accuracy of the predicted return on the investment.

Financial markets are characterized by predictability and inconsistent misalignments that force the prices to always deviate from their fundamental valuations.

This reflects the semi-strong information efficiency model.

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