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
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
- Economy