Answer to Question #12081 in Finance for pat

Question

Discuss the non-rational factors that may have a role in the valuation of stocks and stock market equilibrium. Provide specific examples to support your response.

Answer 1

There is no reason to remain in partnership with dishonest or self-serving
people. However, if the managers are honest, hardworking and competent, that is
an excellent reason to stick with the company during tough times. Regulation and
Legislative Risk Changes in legislation, regulation and case law can affect even
solid, well-run companies. For example, recent health insurance reforms may
affect the profitability of health insurance companies and related industries,
regardless of how capable the management team is. If earnings prospects are
declining and you can do better elsewhere, consider selling.