Common Equity Equilibrium and Its Applications

Thanakornn Phansawadhi

Abstract


Despite of the overabundance of academic research and empirical evidence on the relation of stock market value and accounting variables or financial ratios, but relatively deficiency explanation in term of mathematical expressions. By this reason, this study attempts to comprehend the general relevance or behavioral impact of conservative accounting numbers versus market value of equity by employing the ratio of the cost of equity (COE) –to- return on equity (ROE). In the relation of return demand and return supply, researcher attains the equilibrium condition in common equity which can be described forward the relationship between stock market value and some financial factors in terms of linear equation. In application, the proposition explains how to adapt these relations in order to apprehend the balancing situation, also to determine the overpricing or underpricing situation of equity worth at time.


Full Text: PDF DOI: 10.5539/emr.v1n1p117

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Engineering Management Research   ISSN 1927-7318 (Print)   ISSN 1927-7326 (Online)

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