Question

How does the value of the $ and it's change effect the valuation of stocks?

How do earning surprises effect stock prices?

What is beta?

Answer 1

Answer 1 : Value change is an adjustment made to a stock's price to reflect the number of outstanding stock shares issued and currently held by investors. A value change allows the group of stocks to be equally weighted and, therefore, more easily evaluated. Since the number of shares held by investors changes daily, this number can be updated daily to reflect the changes.

A value change adjustment is intended to equally weigh the stocks that are included in a group. Value change can be used in a variety of settings and describes a type of calculation used to compare and evaluate investment instruments by taking the number of shares held by investors into consideration.

Example of Value Change

For example, if XYZ company currently has 1,000,000 shares outstanding in the public markets and decides to issue an additional 1,000,000 shares, the stock's price may undergo a value change since the number of shares outstanding is doubling, which is a significant change.

Answer 2. An earnings surprise occurs when a company's reported quarterly or annual profits are above or below analysts' expectations. These analysts, who work for a variety of financial firms and reporting agencies, base their expectations on a variety of sources, including previous quarterly or annual reports and current market conditions, as well as the company's own earnings' predictions or "guidance."

Earnings surprises can have a huge impact on a company's stock price. Several studies suggest that positive earnings surprises not only lead to an immediate hike in a stock's price, but also to a gradual increase over time. Hence, it's not surprising that some companies are known for routinely beating earning projections. A negative earnings surprise will usually result in a decline in share price.

Answer 3. A beta coefficient is a measure of the volatility, or systematic risk, of an individual stock in comparison to the unsystematic risk of the entire market. Beta is used in the capital asset pricing model (CAPM), which calculates the expected return of an asset using beta and expected market returns. In statistical terms, beta represents the slope of the line through a regression of data points from an individual stock's returns against those of the market.

• A stock’s beta or beta coefficient is a measure of a stock or portfolio's level of systematic and unsystematic risk based on in its prior performance.
• The beta of an individual stock only tells an investor theoretically how much risk the stock will add (or potentially subtract) from a diversified portfolio.
• For beta to be meaningful, the stock and the benchmark used in the calculation should be related.
• Using beta to choose stocks is one of the tools to reduce volatility and create a more diversified portfolio.