Since I do not understand the stock and financial markets too well, will somebody kindly explain to me, why are the stock/financial markets so volatile? For example, if there is a slight slump in Reliance petro or whatever company for one quarter, the sensex goes into a dive. Does the same thing happen in US /EU when some component of Dow JOnes or whatever underperforms? Are the stocks really sensitive to long term and true performances by a company or nation or just indulge in knee jerk reaction because the CEO of some company/country pur his/her foot in the mouth?
RE:Beware this could wreck etc.
by Gautam Sinha on Dec 18, 2007 07:15 PM Permalink
Just study the concept of weighted average and try to listen to the gibberish of market sentiments and you will have it figured out most of it. Stock prices are mostly speculations based on market sentiments to which one parameter is company performance.
RE:Beware this could wreck etc.
by Ketan Jog on Dec 18, 2007 10:11 PM Permalink
Well Raghu... I ll try to put it the same way as Gautam has... but w a few different set of words.
Stock markets represent valuations of shares. Every person has hisher own perception of Value
Generally, 3 things are most important for valuing anything: The instrinsic value The relative value The contingent value.
Contigent value generally is a subject matter of speculations... being obviously contingent.
It is generally calculated as a differential value and hence, when ascertainity reins, this value is extremely volatile
