Featured Research

from universities, journals, and other organizations

Irrational Exuberence Behind Recent Stock Gains, Says Finance Expert

Date:
October 21, 2009
Source:
University of Alabama at Birmingham
Summary:
A second straight week of stronger-than-expected third quarter earnings from a broad cross section of US industries has held the nation's Dow Jones Industrial Average above the psychological benchmark of 10,000 points for the week of Oct. 19, but the climb isn't likely to last, says a finance expert.

A second straight week of stronger-than-expected third quarter earnings from a broad cross section of U.S. industries has held the nation's Dow Jones Industrial Average above the psychological benchmark of 10,000 points for the week of Oct. 19, but the climb isn't likely to last, says a finance expert at the University of Alabama at Birmingham (UAB).

Related Articles


Assistant Professor of Finance Andreas Rauterkus, Ph.D., says the current levels of the major U.S. stock indices are unquestionably inflated. Rauterkus says the gains are a rubber band-like snap reaction from investors to the market lows of March.

"There is no doubt that the current market levels are the result of the irrational exuberance of investors who were stuck on the sidelines for many months while the country's economy collapsed," Rauterkus says. "Many investors now are back into the market and buying up shares on the kind of news that under more stable conditions would not justify a run up of stock buys."

Rauterkus says he expects the market to reset itself as early as the end of the current earnings season as investors look to take profits from the Dow's climb back to 10,000.

"I think it is wrong to interpret current earnings reports as great news because all that these companies have done in the third quarter is exceed extremely low expectations," he says. "It's like a student earning a grade of D instead of D-minus on a test, neither one is particularly good.

"So, I believe the market is likely to pull back," Rauterkus says. "Certainly not to anywhere near the lows of earlier this year, but the adjustment could be a noticeable."

Rauterkus also expresses concern over the continued weak performance of the U.S. dollar and growing international worry about its role as the international reserve and commodities currency.

"The dollar has lost its one-time title as the world's most reliable currency, which is driving up the prices of commodities like oil at a time when consumers cannot take much higher prices on anything," he says. "It is clear based on the performance of the dollar over recent months that the U.S. is slipping from its status as the world's lone dominant economy, and many up-and-coming nations like Brazil and China will have a growing voice and role in international finance."


Story Source:

The above story is based on materials provided by University of Alabama at Birmingham. Note: Materials may be edited for content and length.


Cite This Page:

University of Alabama at Birmingham. "Irrational Exuberence Behind Recent Stock Gains, Says Finance Expert." ScienceDaily. ScienceDaily, 21 October 2009. <www.sciencedaily.com/releases/2009/10/091021115143.htm>.
University of Alabama at Birmingham. (2009, October 21). Irrational Exuberence Behind Recent Stock Gains, Says Finance Expert. ScienceDaily. Retrieved October 25, 2014 from www.sciencedaily.com/releases/2009/10/091021115143.htm
University of Alabama at Birmingham. "Irrational Exuberence Behind Recent Stock Gains, Says Finance Expert." ScienceDaily. www.sciencedaily.com/releases/2009/10/091021115143.htm (accessed October 25, 2014).

Share This



More Science & Society News

Saturday, October 25, 2014

Featured Research

from universities, journals, and other organizations


Featured Videos

from AP, Reuters, AFP, and other news services

Texas Nurse Nina Pham Cured of Ebola

Texas Nurse Nina Pham Cured of Ebola

AFP (Oct. 25, 2014) — An American nurse who contracted Ebola while caring for a Liberian patient in Texas has been declared free of the virus and will leave the hospital. Duration: 01:01 Video provided by AFP
Powered by NewsLook.com
Ebola Protective Suits Being Made in China

Ebola Protective Suits Being Made in China

AFP (Oct. 24, 2014) — A factory in China is busy making Ebola protective suits for healthcare workers and others fighting the spread of the virus. Duration: 00:38 Video provided by AFP
Powered by NewsLook.com
WHO: Millions of Ebola Vaccine Doses by 2015

WHO: Millions of Ebola Vaccine Doses by 2015

AP (Oct. 24, 2014) — The World Health Organization said on Friday that millions of doses of two experimental Ebola vaccines could be ready for use in 2015 and five more experimental vaccines would start being tested in March. (Oct. 24) Video provided by AP
Powered by NewsLook.com
Microsoft Riding High On Strong Surface, Cloud Performance

Microsoft Riding High On Strong Surface, Cloud Performance

Newsy (Oct. 24, 2014) — Microsoft's Q3 earnings showed its tablets and cloud services are really hitting their stride. Video provided by Newsy
Powered by NewsLook.com

Search ScienceDaily

Number of stories in archives: 140,361

Find with keyword(s):
 
Enter a keyword or phrase to search ScienceDaily for related topics and research stories.

Save/Print:
Share:  

Breaking News:

Strange & Offbeat Stories

 

Science & Society

Business & Industry

Education & Learning

In Other News

... from NewsDaily.com

Science News

Health News

Environment News

Technology News



Save/Print:
Share:  

Free Subscriptions


Get the latest science news with ScienceDaily's free email newsletters, updated daily and weekly. Or view hourly updated newsfeeds in your RSS reader:

Get Social & Mobile


Keep up to date with the latest news from ScienceDaily via social networks and mobile apps:

Have Feedback?


Tell us what you think of ScienceDaily -- we welcome both positive and negative comments. Have any problems using the site? Questions?
Mobile iPhone Android Web
Follow Facebook Twitter Google+
Subscribe RSS Feeds Email Newsletters
Latest Headlines Health & Medicine Mind & Brain Space & Time Matter & Energy Computers & Math Plants & Animals Earth & Climate Fossils & Ruins