What moves stock markets? Evidence that UK stock prices deviate from fundamentals

Authors

David E. AllenFollow
Wenling Yang

Document Type

Other

Publisher

Edith Cowan University

Place of Publication

Joondalup, Western Australia

Faculty

Faculty of Business and Public Management

School

School of Finance and Business Economics

Comments

Allen, D., & Yang, W. (2001). What moves stock markets? Evidence that UK stock prices deviate from fundamentals. Joondalup, Australia: Edith Cowan University.

Abstract

This article examines the deviation of the UK market index from market fundamentals implied by the simple dividend discount model and identifies other components that also affect price movements. The components are classified as permanent, temporary, excess stock returns and nonfundamental innovations in terms of a multivariate moving average model (Lee (1998)). We find that time varying discounted rates play an active role in explaining price deviations.