fin 534 discussion #4.
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Week 4 Discussion
Risk and Return
Please respond to the following:
- Determine whether stock prices are affected more by long-term or short-term performance. Provide one example of the effect that supports your claim.
- respond to this student
RE: Week 4 Discussion
Based on the e-activity I would say because stock prices reflect earnings and growth that stock prices are effected more by long-term performance. Short-term performance effects can reflect positive and negative performance. Every company can have a bad quarter and if investors only made decisions based on, a short term period most probably would not invest. Long-term performance signifies a trend, which stockholders use to determine the value of stock and worth of investing. Long-term performance also shows how a company can turn around the bad, which gives faith for the stockholders to know that down the road if something were to ever happen again it would be ok. Many things happen in the short term like economy, mergers, new laws, and more. Long term is the recovery of short-term imperfections.
A good example of how stockholders looking at short-term performance for stock is Dell. Dell is about to buy back stock and privatize in order to survive in the long run. Dell is an up and down company with sales performance that changes by quarter. They want long-term success instead of short-term gains for stockholders.