SHARE PRICES PROFESSIONAL ENGLISH IN USE FOR FINANCE

 

PROFESSIONAL ENGLISH IN USE FOR FINANCE 32. SHARE PRICES

 

A Influences on share prices Share prices depend on a number of factors: ·         The financial situation of the company ·         The situation of the industry in which the company operates B Predicting prices These are different theories about whether share price changes can be predicted. ·         The random walk hypothesis. Prices move along a ‘random walk’ – this means day-to-day changes are completely random and unpredictable. ·         The efficient market hypothesis. Share prices always accurately or exactly reflect all relevant information. It is therefore a waste of time to attempt to discover patterns or trends – general changes in behaviour – in price movements. C Types of risk Analysts distinguish between systematic risk and unsystematic risk. Unsystematic risks are things that affect individual companies, such as production problems or a sudden fall in sales.   EXERCISES 32.1 Match the two parts of the sentences. Look at A and B opposite to help you. 1 The random walk theory states that 2 The efficient market hypothesis is that 3 Technical analysts believe that 32.2 Are the following, statements true or false? Find reasons for your answers in B and C opposite. 1 Fundamental analysts think that stock prices depend on psychological factors – what people think and feel – rather than pure economic data. 2 Fundamental analysts say that the true value of a stock is all the income it will bring on investor in the future, measured at today’s money values. 32.3 Match the theories (1-3) to the statements (a-c). look at B opposite to help you. 1 fundamental analysis 2 technical analysis 3 efficient market hypothesis

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