Determination of Stock Prices (Efficient Market Hypothesis)

Determination of Stock Prices(Efficient Market Hypothesis):

"My summary for you"

PART: 5

Shares (Partner) certificates express the property belonging to a particular part of the company. The person who holds the partnership deed is eligible on future earnings (profit) of the organization which exports this deed. Shares are kept by Individuals, insurance companies, investment funds and pension institutions in their stock.

And generally, they prefer valued stocks below the real value

Real Value: The value of the stock which has to be.

Calculations for the value of a stock are done by using 3 models:

-  Dividend Model

-  Market value / book value model

-  Price / earnings ratio model

Dividend Models:

Dividend is a payment which is paid directly from the profits of the company to shareholders. Dividend, distribute through Net Profit as an annually result of the companies they have obtained and it is the benefit that to have the capital of shareholders in the companies.

A Company uses its profit by two ways:

- Dividend is transferred to the shareholders (Business partners) or Dividends is paid in cash to partners.

- Profit is never paid to the shareholders, kept in own of Company. Undistributed profits increase the value of the company because either this profit will invest for the projects of the company or it will transform into dividend which will pay to the shareholders in the next terms.

Dividends are distributed by including free of charge to increase the capital for new stock.