raivis kakānis stock market price formation principles and

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1、UniversityofLatviaRAIVISKAKĀNISSTOCKMARKETPRICEFORMATIONPRINCIPLESANDEVALUATIONSummaryRiga2006INTRODUCTIONUrgencyofthesubject:Theurgencyofthesubjectisbasedonafewreasons.First,despitethefactthatthepricingonstockmarketworldwideiscurrentlyinvestigatedverythoroughly

2、,theprocessstillisnotcompletelyunderstoodandnotsubstantiatedfromtheeconomicstandpoint.Itisknownhoweverthatthestockmarketpricesthatareascertainedbasedontheirsellingresultsonthepublicstockmarket,areconsideredarationalestimate,providingtheinformationonarationalande

3、fficientwayofusingthecapital.Secondly,stockmarketpricesvalidonpublicstockmarketsserveasabasisforestimatingbusinessassets.Alongwithfluctuationsofstockmarketprices,thetotalvalueofinvestmentsmadebyacompanyalsofluctuatesaccordingly,whichispotentiallyveryimportant,si

4、nceitexercisesinfluencesdecisionsmadebycompaniesonmanufactureandinvestments.Theeverydayre-valuationoftheexistinginvestmentsvalueonpublicstockmarketswillunavoidablyinfluencethenewinvestmentslevel,sinceestablishinganewcompanyisnotprofitabletobusinessmen,aslongast

5、heycanacquireasimilarcompanyatalowerpriceonthepublicstockmarket.Therefore,fluctuationsofstockmarketpricesinfluencemarketpricesofalltheotherassetsexistingintheeconomy.Finally,theurgencyofthesubjectisbasedonthecurrentextentofinvestigationsoftheissue.TheLatvianstoc

6、kmarketbeingorganizedisrelativelysmallandnewone;theprinciplesofascertainingstockmarketpricesareinvestigatedverylittle.Furthermore,itisnotcleariftheprinciplesoffixingstockmarketpricesinLatviaaresimilartothoseintheworld.Itisobviouslynotcleareitherifthestockmarketp

7、ricesinLatviaareasunpredictableastheyareonthelargeststockmarketsoftheworld.OneshouldtakeintoaccountaverybigamplitudeofstockmarketpricefluctuationsinLatvia,recordedeversincetheorganizedstockmarketwasestablished,-andlackofascientificexplanationofthesefluctuations

8、.Moreover,itshouldbenotedthatbeforethisinvestigationtookplace,theauthorhadnotidentifiedasingleinvestigationmadebytheLatvianauthor,dedicatedtothisissue.However,thesig