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INTERNET STOCKS.
Term Paper ID:26190
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Essay Subject:
Analyzes macroeconomic indicators related to Internet firms going public, impact of Net on stock market, true stock value.... More...
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5 Pages / 1125 Words
3 sources, 7 Citations,
APA Format
$20.00
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Paper Abstract:
Analyzes macroeconomic indicators related to Internet firms going public, impact of Net on stock market, true stock value.
Paper Introduction:
MANAGERIAL ECONOMICS
One of the fastest growing fields in the American economy, and the one in which there is an intense personal interest in joining upon graduation, is the field of helping Internet Companies go public. This is a field that is expected to grow to some $60 billion by the end of this century, a growth that is unheralded in business history. It is a field, however, that is changing so rapidly that it is often hard to determine which economic indicators reflect the actual trends of the field. For instance, there has seldom been an industry where companies that have yet to make a profit (and that even state they might not be profitable for five more years) can and do float sizable IPOs that sell for many times unrealized earnings. However, there are certain macroeconomic indicators that merit watching and they
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When the market pricedeviates from this true value figure, the fundamentalist takes advantage ofthis deviation (or variance) to either buy or sell. Until recently, the study of macroeconomic indicators was ignored atbusiness schools, argues Roger Murray, who revised the bible of fundamentalresearch, Security Analysis. Computer manufacturing numbersF. A random walk down Wall Street. Financialanalysis. Johnson, I. Burton G. (1997). Malkiel, B. Telecom connectivity changesG. 41. For instance,there has seldom been an industry where companies that have yet to make aprofit (and that even state they might not be profitable for five moreyears) can and do float sizable IPOs that sell for many times unrealizedearnings. (1995). In effect, the fundamentalist has his sights firmly set on the future. MANAGERIAL ECONOMICS One of the fastest growing fields in the American economy, and the onein which there is an intense personal interest in joining upon graduation,is the field of helping Internet Companies go public. New York: Wiley. (1993, July 22). IMFJ. Fundamental analysis has been known to include such activities asinvestigating a firm's 1 ks, visiting its managers, and even makingassumptions about how the larger macro-events (war, natural disasters,economic shifts, and so on) will affect the true value of a stock (Sharpe,Alexander, & Bailey, 1995, 842-45). Newsday. related to the rules of the firm foundation theory"(Malkiel, 1996, 117).Conclusions The study of macroeconomic indicators is the only way that logical andrational decisions can be made about the profitability of a potentialoffering of an Internet stock. Shifting demographicsI. The economist. Management would try to use this information to make qualified andeducated guesses about the true value of a stock. Employment figuresH. Johnson says that "in most schools, fundamental analysisis just not taught. This is a field thatis expected to grow to some $6 billion by the end of this century, agrowth that is unheralded in business history. Derivatives and Futures MarketE. (1992). Thisfurther suggests that the fastest growing career field in the nextmillennium will be those technicians who know which "chunks" of dataavailable on the Internet is valid in terms of aiding in strategic decisionmaking, and which data is useless. Top 5 Computer stocksD. Ranked in order of importance for the Internet Industry as a whole,these indicators should be studied on a regular basis.A. Sharpe, W.E., Alexander, G.L., & Bailey, J.V. The public is becoming aware of the intricacies dividing thefundamentalists and the technicians and both of those groups from theacademics. New York: McGraw-Hill. Investmentadvisory services, earnings predictions and complicated chart patterns areuseless" (Malkiel, 1992, 24). Stock analysts need some skepticismfundamental research is shunned. The curious fact about this situation,however, is that the Internet blends previous concepts of "macro" and"micro" in a seamless paradigm of financial information gathering. However, this surfeit of data does not necessarily imply comprehensionor understanding. It is a field, however,that is changing so rapidly that it is often hard to determine whicheconomic indicators reflect the actual trends of the field. The sophisticated manager must be concerned notonly with how his company is performing in relation to its immediatecompetition and within its industry sector but also with a wide variety ofsocio-economic events that can affect the business viability. When the term is applied to the stock market, it meansthat short-run changes in stock prices cannot be predicted. Many analysts take the financial statement they aregiven by the company as gospel. Afundamental analysis would consider such elements as earnings, dividends,balance sheet variables and footnotes, and the quality of management, allvalid economic indicators. He points out that most analysts jumpedstraight from college, where they typically studied finance, to abrokerage, where many soon earned six-figure salaries for writing theresearch reports on companies and industries that brokerage salespeople useto sell stocks. Interest RatesB. caring littleabout the pattern of past price movement... Fundamental analysis of an Internet stock for instance, involvesdetermining the value of a stock by studying elements about the companythat issues the stock (Sharpe, Alexander, & Bailey, 1995, 831). seek to determine an assetsproper value... Malkiel (1992), in his A Random Walk Down WallStreet, discusses the difficulty of determining the future: "A random walkis one in which future steps or directions cannot be predicted on the basisof past actions. Malkiel makes this distinction: "Fundamental analysts... Dow Jones, NASDAQC. It is that challenge that faces themodern manager who is trying to determine a safe and profitable course forthe company to follow. New York: Wiley. Today, hundreds of online services that candispense megabytes of financial data (and economic indicators) instantly. In fact, they should be assuming just theopposite" (Johnson, 41, 1993). References Guide to ecomomic indicators. One could safely substitute the phrase"economic indicators" for "stock market" in that quote since both stockmarket price projections and economic indicators are cut from the samecloth. Since E-commerce on the Internet embraces many diverse industries, andsince the concept of studying economic indicators is quite similar to doingfundamental stock analysis, the two procedures have grown to be animportant management tool. However, there are certain macroeconomic indicators that meritwatching and they will be discussed in this short essay.Why Is this Important for Managers? ASEAN Nations(Guide to economic indicators, 1997).The Relationship of These Indicators to the Internet The Internet has created a computerized financial data industry thathas become a $4 billion business since the first computers showed up onbrokers' desks in the 197 s. What the result of this knowledge will be remains a mystery.Some analysts, including Malkiel, feel that the spin-off results for theinvestment market could be serious, leading more and more investors to turnaway from traditional brokers and analysts and to attempt to manage theirown portfolios.What Economic Indicators Bear Watching? In other words, if one is going to invest in the market, it is up tothat person to learn how to make sense of the wide variety of informationavailable to the novice investor.
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