Concluding Remarks

Abstract

We started the book by describing the role of the stock market. In doing this we introduced the concept of an ‘efficient market’, that is one which provides ‘accurate’ share pricing such that resource allocation is optimised. An efficient market is obtained partially by having a highly competitive, well-regulated and expert stock exchange. Chapters 2 and 3 led on from this by describing the actual methods used by investment analysts in evaluating share prices. Clearly a high level of detailed analyses are being undertaken by investment analysts in their work. Chapter 4 reviewed some empirical studies that have been made into the forecasting of earnings and other accounting data by purely statistical means. These studies have found there to be little predictive ability in using statistical extrapolations of past data — hence the work of investment analysts is made that much more difficult; there are no mechanical ways of successfully forecasting future earnings data (except from interim accounts).