• Text

Interpret Management, Market Signals To Garner Better Shareholder Returns

Breathtaking volatility has caused many investors to regard the stock market as increasingly risky. Sharp price swings, they conclude, reflect some fundamental weakness in the way stocks are valued.

But while such views are understandable, especially after the tumult investors lived through in 1998, they are misinformed. Far from being a sign of weakness, volatility should be seen as encouraging evidence that stock prices incorporate the most recently available information. Increased global interdependencies and advances in...