Premium Essay

How Do Certain Economic Factors Affect Stock Prices?

In: Business and Management

Submitted By eriljw
Words 2061
Pages 9
How Do Certain Economic Factors Affect Stock Prices?


For our analysis, we chose to examine how different economic factors such as GDP, CPI, and unemployment affect stock prices. More specifically, we analyzed how these economic factors affected the stock prices of three different companies during the period from 2000-2009. The three companies that we chose were Exxon Mobil, Tiffany & Co, and Southwest Airlines. We chose those particular companies because each one offers products or services that represent a different degree on the price elasticity of demand spectrum. Exxon Mobil represents a company that offers a good which is inelastic. This means that no matter what economic conditions are present in the market, the quantity demand for this product is going to stay constant since consumers feel they cannot live without it. On the other hand, Tiffany & Co. represents a company that sells products which are elastic. This means that consumers will choose to buy their products depending on the conditions present in the market. Southwest Airlines represents a company that offers a service which can be viewed as both inelastic and elastic depending on the type of travel being studied. For business travelers who are required to fly for their jobs, the service that Southwest Airlines provides is inelastic since they generally have no choice in whether they fly or not. On the other hand, there are travelers who view flights as an elastic product because the reason for their travel is due to pleasure, like people who fly in order to vacation.

We will split up our analysis into three parts; we will first focus on how GDP affected the stock prices of the three different companies. We will discuss GDP and how it affects stock prices; we will also give our hypothesis as to how we think GDP would affect...

Similar Documents

Premium Essay

Investor Behaviour

...SHRI RAM COLLEGE OF COMMERCE A STUDY ON FACTORS INFLUENCING INDIVIDUAL INVESTOR BEHAVIOUR Project work Paper No. – CH 6.3 (b) (Submitted for Partial Fulfillment Towards Requirement of B.COM (HONS.) Course) Ashvi Mittal 12BC136 12072204129 E-21 2014-15 UNDER THE SUPERVISION OF Miss Ankita Tomar Assistant Professor Department of Commerce Shri Ram College of Commerce University of Delhi 1       DECLARATION BY STUDENT This is to certify that the material embodied in this study entitled “A STUDY ON FACTORS INFLUENCING INDIVIDUAL INVESTOR BEHAVIOUR” is based on my own research work and my indebtedness to other work/publications has been acknowledged at the relevant places. This study has not been submitted elsewhere either wholly or in part for award of any degree. Ashvi Mittal B.Com(H) Section-E 12BC136 2       DECLARATION BY TEACHER INCHARGE This is to certify that the project titled “A STUDY ON FACTORS INFLUENCING INDIVIDUAL INVESTOR BEHAVIOUR” done by Ashvi Mittal is a part of her academic curriculum for the degree of B.Com(H). It has no commercial implication and is done only for academic purpose. Mrs Aruna Jha Miss Ankita Tomar (Teacher in- charge’s name and signature) signature) 3       (Mentor’s name and Signature) ACKNOWLEDGEMENT I feel great pleasure in expressing my gratitude to my mentor Miss Ankita Tomar of Commerce Department, Shri Ram College......

Words: 6505 - Pages: 27

Premium Essay

Financial Management Theory and Practice

...Question a. Why is corporate finance important to all managers? Corporate Finance is important to all managers because it gives them the skills necessary to identify and select the corporate strategies that could add value to the company. Question b. Describe the organizational forms a company might have as it evolves from a start-up to a major corporation. List the advantages and disadvantages of each form. |Organizational Form |Advantages |Disadvantages | |Sole Proprietorship |It is easily and inexpensively formed. |Difficult to obtain the necessary capital | | |It is subject to few Government rules and |needed for expansion and growth. | | |regulations. |Due to unlimited personal liability for the | | |Its income is not subject to corporate |business’ debts, the Proprietor may incur | | |taxation, but is taxed as part of the |losses that exceed the money invested. | | |Proprietor’s personal income. |The life of the proprietorship is limited to | | ...

Words: 1428 - Pages: 6

Premium Essay

Fin 652 Term Paper

... ABSTRACT Liquidity risk in the pricing of corporate bonds and the importance of investors knowing liquidity risk in the pricing of corporate bonds and how it affects returns on investments is an important factor in the performance of financial institutions. This paper summarizes the research of several different researchers and their take on the importance and significance of liquidity risks. Furthermore, it addresses the assumptions, a review of different studies as well as a contrast of different methodologies on how liquidity of risk in the pricing of bonds has an affect on investments. PURPOSE OF THE STUDY The purpose of this study is to demonstrate how to conduct an analysis and predict future situations of the liquidity risk in the pricing of corporate bonds. We will also study different companies and previous studies to see how they handled liquidated risk. Corporate bonds are good for businesses with a high credit value. It is easy for them to be able to issue higher bond amounts with a low interest rate. Many people believe that corporate bonds put you at a higher risk because of its taxable terms, ability to collect assets and etc. On the other hand, liquidity is being able to sell or trade fast without affecting the overall price. It also is the meaning of assets, securities and etc. being able to be quickly converted into cash. When these two things come together, we have the liquidity of......

Words: 3038 - Pages: 13

Premium Essay

Case Study

...a. Why is corporate finance important to all managers? It is important that a manager under the basic components of running a business. Understanding things such as the return of investment and interest over time should also be concern to the manager as well. Especially since factors as such determine the company’s ability to continue to stay in business and be successful. b. Describe the organizational forms a company might have as it evolves from a start-up to a major corporation. There are three forms of start-up that is incorporated into the corporate life cycle. Business has the choice to start up as proprietorship, which is non corporate business ran by one owner. There is also a partnership, which represent more than one owner to the business. This is also a non corporate business as well. Under a partnership other forms of partnerships such as: limited liability partnership (LLP) or your limited liability company (LLC). The final stage of corporate life cycle exists once the company has gained a certain amount of capital that allows them to become a corporation. List the advantages and disadvantages of each form. The advantages of proprietorship it doesn’t cost much and relative easy to start a proprietorship. Proprietorship is also bond by a few government regulations. In a proprietorship income is not tax under corporate taxation; instead it is taxed as a part of the proprietor personal income. The disadvantage of operating under a proprietorship is it is...

Words: 1405 - Pages: 6

Premium Essay

Stock Market Risk

...STOCK MARKET: Stock Exchange (also called Stock Market or Share Market) is one important constituent of capital market. Stock Exchange is an organized market for the purchase and sale of industrial and financial security. It is convenient place where trading in securities is conducted in systematic manner i.e. as per certain rules and regulations. It performs various functions and offers useful services to investors and borrowing companies. It is an investment intermediary and facilitates economic and industrial development of a country. Stock exchange is an organized market for buying and selling corporate and other securities. Here, securities are purchased and sold out as per certain well-defined rules and regulations. It provides a convenient and secured mechanism or platform for transactions in different securities. Such securities include shares and debentures issued by public companies which are duly listed at the stock exchange, and bonds and debentures issued by government, public corporations and municipal and port trust bodies. STOCK MARKET OF BANGLADESH: Bangladesh has two Stock Exchanges, Dhaka Stock Exchange (DSE), where trading is conducted by Computerized Automated Trading System and Chittagong Stock Exchange (CSE), which is also conducted by Computerized Automated Trading System . All exchanges are self-regulated, private sector entities which must have their operating rules approved by the SEC. The Chairman and Members of the Commission are appointed by...

Words: 4245 - Pages: 17

Premium Essay

Finance Homework

...a. Why is corporate finance important to all managers? Corporate finance provides the skills managers need to: (1) identify and select the corporate strategies and individual projects that add value to their firm; and (2) forecast the funding requirements of their company and devise strategies for acquiring those funds. b. Describe the organizational forms a company might have as it evolves from a start-up to a major corporation. List the advantages and disadvantages of each form. The three main forms of business organization are sole proprietorships, partnerships, and corporations. Several hybrid forms are also gaining popularity. These include the limited partnership, the limited liability partnership, the professional corporation, and the S corporation. The proprietorship has three important advantages: (1) it is easily and inexpensively formed, (2) it is subject to few government regulations, and (3) the business pays no corporate income taxes. The proprietorship also has three important limitations: (1) it is difficult for a proprietorship to obtain large sums of capital; (2) the proprietor has unlimited personal liability for the business’s debts, and (3) the life of a business organized as a proprietorship is limited to the life of the individual who created it. The major advantage of a partnership is its low cost and ease of formation. The disadvantages are similar to those associated with proprietorships which are unlimited liability, limited life of......

Words: 2697 - Pages: 11

Premium Essay

Fi515 Hw1

...Mini Case (p. 45) a. Why is corporate finance important to all managers? It is important because successful companies must not only be able to obtain high valued product and satisfy customers; they must be able to generate enough cash to compensate investors who provide the capital. Corporate finance helps to do this by giving managers tools to evaluate any proposal, such as marketing, production, and strategy and be able to implement only the projects that add value for the investors. b. Describe the organizational forms a company might have as it evolves from a start-up to a major corporation. List the advantages and disadvantages of each form. Companies can have three organizational forms which are proprietorships, partnerships and corporations. Companies usually start as a proprietorship which is owned by one individual. It is generally easy and inexpensive to startup; it has fewer regulations than other organizational forms; and the income is not subjected to corporate taxation but is taxed as part of the proprietor’s personal income. However, the disadvantages of a proprietorship are that it may be difficult for a sole owner to generate needed capital for growth; personal liabilities are unlimited for the business debt, which can have implications on the owner’s personal assets such as property; and the life of the company is limited to the life of the founder. A general partnership is the same as a sole proprietorship in that it is a business that......

Words: 2004 - Pages: 9

Premium Essay

Fi515 Homework

...disadvantages of each form. A company may start out as a sole proprietorship or partnership and work its way towards becoming a corporation. * c. How do corporations go public and continue to grow? What are agency problems? What is corporate governance? Agency problems occur when managers act in a way that benefits themselves and acts in ways that are not in the best interests of the stockholders or owners of the company. Corporate governance is the set of rules that are used to direct the company’s actions towards its employees, “shareholders, creditors, customers, competitors, and community” and is a means by which agency problems are addressed (Brigham, Eugene F. . Financial Management: Theory & Practice, 13th Edition. South Western Educational Publishing, 03/2010. p. 8). Corporations go public through an initial public offering (IPO) which is when the company’s stock is sold to the public at large. After an IPO, corporate growth is supported by taking out loans from banks or selling stock. A company’s growth depends on how it does in the financial markets it is involved in. * d. What should be the primary objective of managers? The primary objective of managers it shareholder wealth maximization, which means to maximize the profitability which in turn maximizes that stock price of the company. * (1) Do firms have any responsibilities to...

Words: 2221 - Pages: 9

Premium Essay

World for Business

...Factors affecting on stock price 1. Introduction The stock market has become an essential market playing a vital role in economic prosperity that fostering capital formation and sustaining economic growth. Stock markets are more than a place to trade securities; they operate as a facilitator between savers and users of capital by means of pooling of funds, sharing risk, and transferring wealth. Stock markets are essential for economic growth as they insure the flow of resources to the most productive investment opportunities. In essence, a large number of economic variables like gross domestic product, interest rates, current account, monthly supply, employment, their information etc. have an impact on daily stock prices (Kurihara, 2006). This paper reflects how stock price is determined by considering the effect of different factors and outlines whether the internal, external and economic factors have impact on stock pricing. This study is about to know whether Dividends, paid up capital, market capital, corporate social responsibility, lawsuits, Retained Earnings, AGM, EGM, Earning Per Share, Rumors, Margin Loan, Net Income, Face Value, Return on Investment, Goodwill of the firm, Company News, Analysts Report, Sentiment, Rumors, etc. depends on stock price or merely some special factors like stock dividend, P/E ratio, government policy, macroeconomics fundamental, investors......

Words: 4571 - Pages: 19

Premium Essay

Fi 515 Mini Case

...FI 515 Financial Management Mini Case a. Why is corporate finance important to all managers? Corporate finance is important to all managers because they to know the company’s financial state before they can make decision. For example one important fact they will find useful is the company’s ROI. Knowing this figure can help the managers determine how much they spend and what return with it generate. Other important factors are debt and equity. Managers should understand issuing debt would reduce the company’s ROI and understanding that may be other options like issuing equity. b. Describe the organizational forms a company might have as it evolves from a start-up to a major corporation. List the advantages and disadvantages of each form. Proprietorship * Advantages: * It is easily and inexpensively. * It is subject to few government regulation * It is subject to few government regulations. * Its income is not subject to corporate taxation but is taxed as part of the proprietorship to obtain the capital needed for growth. * Disadvantages: * It may be difficult for a proprietorship to obtain the capital needed for growth * Proprietor has unlimited personal liability for the business’s debts. * The life of the proprietorship is limited to the life of its founder. Partnership * Advantages: * Partnerships are relatively easy to establish; however time should be...

Words: 1160 - Pages: 5

Premium Essay


...Economic Advisement paper Christopher Nieto, Veronica Rodriguez, Reynaldo Morales, Vanessa Monge 9/9/2013 ECO372 Mr. Frank Vigil Economic Advisement Paper There are different schools of thought about how the economy arrived at its current state. Conversely, there are different schools of thought on how to restore the economy. There are some who would advocate that going back to the same economic policies that created the currents conditions of the economy. In the following paragraph of this paper team B will discuss the current state of the United States economic recovery from the prospective of Unemployment, Consumer income, Interest rates, and Expectations respectively. This information will be summarized and recommendations made to the president regarding government spending and taxes based on the aforementioned economic factors. Unemployment Unemployment is affected by multiple economic factors. A recently suggested factor is consumer and private sector uncertainty. This uncertainty is created by the lack of confidence in the current state of the economy and its recovery. This has forced consumers and the private sector to reduce spending and cut cost, thus driving unemployment. Recent studies have demonstrated that uncertainty has been harming current economic activity. Consumer uncertainty is driving the decline in aggregate demand which forces the reduction in supply. When supply decreases, businesses respond by reducing spending and cutting back cost......

Words: 1467 - Pages: 6

Premium Essay

Pato Naa

...objectives for the future (usually one to three years) and to show how they will be achieved. It serves as a plan to guide the firm's policies and strategies, and is continually modified as conditions change and new opportunities and/or threats emerge.  The business plan process is simply the steps you go through and actions you take when producing a business plan. In effect, it describes how you produce your business plan. While most people focus on the ‘final output’, i.e. the business plan itself, the business planning process is extremely important for entrepreneurs. PROCESS OF BUSINESS PLAN The process of producing a business plan forces entrepreneurs to examine areas of their business that typically may not be subject to much scrutiny. For example, entrepreneurs do not tend to routinely produce cash flow forecasts, so the requirement to produce one as part of the business planning process forces them to consider the impact of cash on their business. The business plan process typically begins with an event, be it the need to produce a business plan when seeking investment, or to obtain short-term financing from a bank. Once a business plan is needed, the entrepreneur has to then decide how they are going to go about producing the plan. They will need to undertake the following: 1. Decide who is going to write the plan (if not themselves). 2. Gain an understanding of what a business plan contains. 3. Decide how to write their plan (typically using business......

Words: 2506 - Pages: 11

Premium Essay

Business Environment

...Assignment Name : HND BUSINESS ENVIRONMENT Student Name : IGOR ORLOV Student ID : SC 4074 Semester : CONTENTS PAGE Introduction 02 A Brief Overview of Toyota Motor Corporation 02 A Brief History 02 Section LO1 - Organisation Purposes 03 Purposes of different type of Organisation 03 Stakeholders expectation and Organisational strategies 04 Responsibilities of Organisation and strategies to meet them 05 Section LO2 - Nature of the natural environment 07 Economic system and resources 07 Fiscal and monetary policies effect on Organisation activities 09 Competitor strategy 09 Section LO3 - Organisational Behaviour in market environment 11 Pricing and output decision 11 Market forces and effects for an Organisation 11 Business and cultural environment 11 Section LO4 - Significance of global factors affecting a business 13 International trade 13 Global factors influence on a business 13 Summary and conclusion 14 Credits and references 14 INTRODUCTION My aim in writing this assignment is to delve into the subject of Business Environment and describe its key functions. I have chosen to research and submit my findings based on the company Toyota Motor Corporation, and look into ways in which the subjects covered in this assignment apply to this corporation. A BREIF OVERVIEW OF TOYOTA MOTOR CORPORATION Toyota Motor Corporation commonly known simply as Toyota and abbreviated as TMC, is a Japanese...

Words: 5079 - Pages: 21

Free Essay


...constraints no matter how successful the business is. One of the most common organizations that we can refer to in our daily lives is the restaurant industry. Restaurant is basically a place that prepares and serves food for customers outside from home. The main purpose of a restaurant is serving food to customers, but some may also provide entertainment or other services. With all the various types of food that we consumers demand for, the restaurant industries have different kind of restaurants, for example, Thai cuisine restaurant, Chinese food restaurant, Sushi restaurants, fast food restaurant, in order to satisfy customers’ desire. The restaurant industry is the largest employer in the private sector, and it continues to get larger every year (, 2014). According to the National Restaurant Association’s analysis, the restaurant employment stands 441,000 jobs above its high point before the recession, while the overall economy in 2012 is still down 3.2 million jobs from the prerecession peak (, 2013). It might seem like an easy business to set up as food is under the physiological needs according to the Maslow’s hierarchy of needs, which means there will be no problem of running the business as an individual moves up the needs hierarchy from one level to the next (McLeod, 2007). Human needs food to survive, thus, the restaurant industry may easily gain a desirable profit. However, there are a few external environmental factors that affect the......

Words: 2710 - Pages: 11

Premium Essay

Tortas Ahogadas La Michoacana

...explaining the finance concepts found in the readings and how they relate to the context of the scenario. Format your paper consistent with APA guidelines. When someone takes an action, that action eliminates other possible actions. Informally, people often refer to an unused opportunity as an opportunity cost. More precisely, an opportunity cost is the difference between the value of one action and the value of the best alternative. An opportunity cost provides an indication of the relative importance of a decision. When the opportunity cost is small, the cost of an incorrect choice is small. Similarly, when the opportunity cost is large, the cost of not making the best choice is large. Suppose you sell a car for $7,200 without much forethought. You find out the next day that the car could have been sold for $7,300. You have incurred an opportunity cost of at least $100. You might not consider that very significant. But suppose you discovered the next day that the car could have been sold for $9,500. You probably would consider the opportunity cost of $2,300 on an asset worth $9,500 significant. An important application of the Principle of Self-Interested Behavior is called agency theory. Agency theory analyzes conflicts of interest and behavior in a principal–agent relationship. Broadly speaking, a principal–agent relationship is a relationship in which one entity, an agent, makes decisions that affect another entity, a principal. Moral hazard......

Words: 7734 - Pages: 31