ASSIGNMENT | Determination of Stock Prices

Determination of Stock Prices [WLOs: 1, 2] [CLOs: 3]
Stock prices are very difficult to predict; although, there are some theories for the determination of stock prices such as the fundamental analysis, the Gordon growth model (or dividend-discount model), and the efficient market analysis. Prior to beginning work on this assignment, read Hubbard and O’Brien’s (2017) Chapter 6 and Garth Friesen’s (2017) article, When Good News Is Bad for Stocks (Links to an external site.)Links to an external site., and respond to the following components.

Analyze reasons why good news for the economy (long term) isn’t always good news for stock and other financial markets (short term).
Evaluate the assumption that stock price movements are purely random (the random walk theory), describing what a random walk is.
Discuss the strengths and weaknesses of the efficient markets hypothesis.
Explain the rationale for buying stocks when stock prices are not predictable, noting what kind of strategies would be useful for investing $100,000.
The Determination of Stock Prices paper

Must be three to four double-spaced pages in length (not including title and references pages) and formatted according to APA style as outlined in the Ashford Writing Center (Links to an external site.)Links to an external site..
Must include a separate title page with the following:
Title of paper
Student’s name
Course name and number
Instructor’s name
Date submitted
Must use at least three scholarly, peer-reviewed, and/or other credible sources in addition to the course text.
The Scholarly, Peer Reviewed, and Other Credible Sources (Links to an external site.)Links to an external site. table offers additional guidance on appropriate source types. If you have questions about whether a specific source is appropriate for this assignment, please contact your instructor. Your instructor has the final say about the appropriateness of a specific source for a particular assignment.
Must document all sources in APA style as outlined in the Ashford Writing Center.
Must include a separate references page that is formatted according to APA style as outlined in the Ashford Writing Center.

SAMPLE SOLUTION

Determination of Stock Prices

When Good News Is Bad for Stocks A number of factors determine changes in the stock market immediately after the release of pertinent economic news. Interest rate, economic cycle, marketing position, value of the data, and whether the information was expected are some of the factors that affect price changes in the stock market. In most cases, the phase of the economic cycle (expansion or contraction) has direct bearing on the market behavior following an economic release. For instance, a report indicating significant drop in the rate of unemployment and an upsurge in hourly wages is ideally positive news for the economy in question. However, if the economy is at the last stages of an extended expansion phase, strong data could interfere with market expectations. Where the economy is undergoing contraction, the same data would perhaps produce fairly different market behavior. With limited concern regarding an overheated economy, a positive employment growth could raise profit projections. In such a case, stock prices would go up because the reduced unemployment level would not affect the nation’s monetary policy…