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In: Finance

determine whether stock prices are affected more by long-term or short-term performance. Provide one (1) example...

determine whether stock prices are affected more by long-term or short-term performance. Provide one (1) example of the effect that supports your claim.

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Expert Solution

The stock prices are affected by both- long-term and short-term performance. However, the long-term performance is composed of several short-term performances. A consistent trend in multiple short-term performances defines the long-term performance. Hence, short-term performance has a more drastic impact on the stock performance. This impact is largely seen at the time of presentation of quarterly results by the company. Quarterly performance is a very short term performance measure for the companies which are expected to be in operation for perpetuity. A lower than expected quarterly result decreases the stock price very prominently, even if the company has provided consistently good annual results over past few years, i.e. in the long term. Boeing is a good example of this effect. The quarterly performance swings the stock prices by 3-5% in the period leading to the results announcements.


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