FINANCIAL ECONOMICS

Financial Economics

Financial Economics

Introduction

Stock prices are moves not one or two but under the influence of a mixture of factors that no person can always comprehend or envisage. Overall, analysts believes that these price movements are the reflection of long term earning prospects of the companies that is perceived by the investors and the general market. Investors are drew closer to stocks of companies they think will make considerable profits in the future; since many investors desire to acquire stocks of such companies, share prices of these companies tend to go up. On the contrary, investors are unwilling to buy stocks of companies that look bleak in earnings prospects; since fewer people desire to purchase and more incline to sell these stocks, prices tend to fall down.

When it comes to theoretical conception, there are number of theories acting at the same time while some are not at all. There are many investments theories attracting their own group of supporters. One of them is efficient market hypothesis which contends that it is not possible to 'beat the market'. Share prices reflect the information that each stock carries. Expected dividend bonus will make the price rise of a respective stock. In contrast, reports of negative earnings will tend to decrease the stock price. According to EMH, in the efficient market, all shares are traded at fair value because they have already incorporated the effect of news in them. Thus, making it unattainable for investors to either acquire undervalued stocks or put up for sale stocks for inflated prices. Hence, it should be impossible to surpass the general market through specialist selection in stock or timings in market. The only way left to make high profits is to invest in riskier investments.

Although it is a foundation stone of contemporary financial theory, the Efficient Market Hypothesis is extremely contentious. Believers assert it is useless to look for undervalued stocks in the market or to attempt to forecast trends in the market using either technical or fundamental analysis. In the meantime, as academics indicate a large body of proof in support of this theory, an equal quantity of disagreement also presents. For instance, investors, like Warren Buffett have time after time beaten the market for a long period of time, which cannot be explained by EMH.

BAE Systems plc

BAE Systems plc is a international defense and security company. BSE system delivers a variety of products and services for land, naval and air forces, and also advanced electronics, information technology solutions, security and support services. It has five segments:, Intelligence & Support, Electronics, Programmes & Support, Land & Armaments, International and HQ & further Businesses. BSE system operates in UK, USA, Australia, India, and the Kingdom of Saudi Arabia. In April 2011, the Company totaled the outstanding equity acquisition of the Fairchild Imaging, Inc. In June 2011, the Company put up for sale and sold Saab AB. On 13th July, 2010, the Company acquired a majority stake in Atlantic Marine (Atlantic Marine Holding ...