The Intrinsic & Market Value of the Common Stocks: Evidence from Palestine Exchange
Awad, Ibrahim M.
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In analogues way to the sayings “What goes around comes around” the market price of the company stock’s is closely related to its performance, the more optimistic, the more the investors will be and hence willing to pay a higher price for the company's share and vice versa. Seamlessly, given that the goal of the firms is to maximize the value of the shareholders, the more the intrinsic value of the company stock, the more market value of the stock price, so that there is a positive correlation between the intrinsic and market value of a particular common stock. This is founded in the first test of this study. Ironically, the positive correlation does not always imply that the intrinsic value causes the changes in market value; that is, empirical results of the co-integration test of this paper reveals that the market value is what causes the changes in intrinsic value, meaning that stock prices in Palestine Exchange does not significantly depend on fundamentals, but rather on supply and demand forces, other things being equal.