Sample Thesis Paper
Another element of the relationship between the book value and the market that is caused by the behaviour of the market value is the under pricing and overpricing of the shares of a company. Shares are regarded as underpriced if the market value of the shares is lower than the book value. In such as case the whole business is trading at a value that is lower that the value of all its assets.
Overpricing occurs when the market value of the share of a company is higher than the book value. In such a case the company is trading at a price that is higher than the price of all its assets (Joseph and Lipka, 2006). Fundamental investing and stock analysis is based on the assumption that the market value always moves above and below the actual value of the business as measured by the book value or other measures and profits can be created by buying the stock when it is underpriced and selling it when it is overpriced.