Home  Journals  Finance and Credit  43(619) - 2014 November

Investment analysis: anomaly of the modern stock market

Available online: 3 November 2014

Subject Heading: Stock market

JEL Classification: 

Pages: 2-9

The article notes that the anomalies in the form of speculative "bubbles" have been throughout the world history of stock markets. This phenomenon hurts the pocket of most investors, who do not fully understand the essence of the stock market and investing basics. This problem is relevant at every stage of the economic cycle, since now investors can make money in any market condition: during times of economic growth and recession. We consider and make an analysis of the explicit speculative examples of the past: the Tulip mania, the Panama Canal Scandal, the South Sea Bubble, and also the actions of the Twitter Company spreading the Bitcoin crypto-currency. We are considering the fundamental value of these assets and provide and calculate the most significant multipliers and those ones, which are most frequently used in the financial world. We define the tools which promote the development of speculative bubbles. Following the results of the analysis, we specify the common features of this anomaly, and arrive at conclusions that may help investors to understand the mechanisms of stock market functioning, and also the basic principles which are necessary to follow while selecting assets for the portfolio, and when it has to be done. We emphasize that by observing these principles, an investor will be able to indemnify against speculative bubbles, and will considerably improve the quality of the investment. An investor will invest in clear business and be able to determine the agreeable price of the future transaction.

Keywords: financial analysis, reasonable investor, speculative bubble, Twitter, Bitcoin

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ISSN 2311-8709 (Online)
ISSN 2071-4688 (Print)

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