Financial markets are often under heavy fire. More often than note they are accused of being short-sighted. Short-termism is the term that is hammered by financial markets opponents. This is echoed for instance by a recent piece from OECD which emphasizes the necessity to restore trust in financial markets.
Something is puzzling though. Indeed, figures don't add up. Analysts say that their job is to predict the dividend flows over the next five years Let's believe them. What's next? Well, if you take the present value of these five future cash-flows and compare it to the currently prevailing stock price you get that this present value is only 5 to 10% of the price. So, 90 to 95% relates to a time horizon beyond five years. Is this what they call short-sighted? Keep me posted!
In the meantime, for those who have access to www.cyberlibris.com, you'll find some clues for example in:
Eric Briys et François de Varenne, The Fisherman and the Rhinoceros, Chichester, John Wiley & Sons, 2000
Aswath Damodaran, Corporate Finance, New York, John Wiley & Sons, 2001
Hélène Löning, Le contrôle de gestion, Paris, Dunod, 1998
Mark J. Roe, Strong Managers, Weak Owners, Princeton University Press, 1994
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