Inefficiency in Iran Capital Market can lead to trading bias

The Challenging Path of Stock Valuation

SEO should not interfere in valuation?

Valuation is the knowledge that can be used to model all the factors affecting the cash flow of a company and by discount the cash flow, determine the intrinsic value. Valuation should also be done by qualified persons. According to some market players, the valuation of companies' stocks is up to the Evaluator and the Stock Exchange Organization (SEO) should not interfere. Some other, however, believe that SEO as a Supervisory Authority can monitor this. It is suggested by market players to monitor and evaluate companies on a continuous basis at different thresholds, and upon improvement in information efficiency, propel the companies to top Leaderboards. Also, a warning and penalties should be given to managers of those, if they do not provide transparent and reliable information. in this regard, Dr. PAKDIN's opinion published in the stock exchange information weekly is as follows:

The lack of  Capital Market Efficiency

By: Dr. Aliraza PAKDIN

valuation is the knowledge that can be used to model all the factors affecting the cash flow of a company and by discount the cash flow, determine the intrinsic value. In valuation models, all of the company's financial processes are simulated. Therefore, investors can calculate the relative impact of the reports on the intrinsic value of the stock and execute the transactions with expected earnings. Investment managers can also measure the impact of decisions and can create value to shareholders. Capital market efficiency has always been rooted in entities that perform transactions based on rigorous valuations. Given the conditions experienced in the base market and the entry of the supervisory authority to adopt a trading policy with a view to regulating the volume, price, and manner of trading, which has caused the publication of market players' analysis of its effects, any SEO interfere goes beyond the intrinsic value of corporate stocks, indicates the lack of market maturity. The experience of parallel markets has shown that any phenomenon that disrupts the competitive process will create consequences for that market. On the other hand, the execution of divergent pricing mechanisms relevant to valuation reports is causing traders to ignore the analysis and reduce market depth and cause price deviations. In other words, market inefficiencies can lead to trading bias. So the best policy in any market is to maximize market efficiency, along with the not-entering of the policy makers in pricing procedure. In each market, the evaluator is responsible for the analytical reports of stock valuations that are issued upon the applicant request. Evaluators within the scope of responsibility are also accountable for their reports. Hence, the status of SEO goes beyond this area.

Stock exchange Information weekly - August 2019- Third Week- Seventh Year- No. 317- Page 15