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.
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.