"Stock prices always reflect the best estimate of the present value of the expected future cash flows of a firm. Therefore, stock prices will change only when new information enters the
Market." This statement would be attributed to an investor in which of the
Fundamentals-based classes?

Question

Quizplus · Accepted Answer

This statement reflects the view of a true believer in fundamentals-based analysis, who believes that stock prices are primarily driven by the fundamentals of a company and will only change when new information affecting those fundamentals is released. Firm believers may hold a similar view, but may incorporate other factors into their analysis as well. Mild believers and non-believers are less likely to attribute stock price changes solely to fundamental factors. This statement aligns with the beliefs of a true believer in fundamentals-based investing, who believe that stock prices are primarily determined by the fundamental performance of the underlying companies, and that the market will eventually reflect this fundamental value. This view assumes that the market is efficient and information is quickly and accurately reflected in stock prices.

"Stock Prices Always Reflect the Best Estimate of the Present