What Moves Stock Prices? Evidence that UK Stock Prices Deviate from Fundamentals

39 Pages Posted: 11 Dec 2000

See all articles by David E. Allen

David E. Allen

School of Mathematics and Statistics, The University of Sydney; Financial Research Network (FIRN); Department of Finance; School of Business and Law, Edith Cowan University

Wenling Joey Yang

Securities Industry Research Centre of Asia Pacific (SIRCA); School of Finance and Business Economics

Date Written: November 2000

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 non-fundamental 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.

Keywords: Sims-Bernanke Variance Decomposition, Trivariate Moving Average

JEL Classification: G12, C13, C32, C51

Suggested Citation

Allen, David Edmund and Yang, Wenling Joey, What Moves Stock Prices? Evidence that UK Stock Prices Deviate from Fundamentals (November 2000). Available at SSRN: https://ssrn.com/abstract=249248 or http://dx.doi.org/10.2139/ssrn.249248

David Edmund Allen (Contact Author)

School of Mathematics and Statistics, The University of Sydney ( email )

School of Mathematics and Statistics F07
University of Sydney
Sydney, New South Wales 2006
Australia

HOME PAGE: http://www.maths.usyd.edu.au

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Department of Finance ( email )

Taiwan
Taiwan

School of Business and Law, Edith Cowan University

100 Joondalup Drive
Joondalup, WA 6027
Australia

HOME PAGE: http://www.dallenwapty.com

Wenling Joey Yang

Securities Industry Research Centre of Asia Pacific (SIRCA) ( email )

New South Wales 1215
Australia

School of Finance and Business Economics ( email )

100 Joondalup Drive
Joondalup, WA 6027
Australia
+618 9400 5099 (Phone)
+618 9400 5271 (Fax)

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