<p>The starting point of this Master Thesis have been utterances of well known investors during</p><p>the financial crisis which recommend to buy shares especially in the time of financial</p><p>downturn because one could buy good performing companies at a low price.</p><p>This arouse the question if broad fear of market participants during the financial crisis of 2007</p><p>to 2009 leads to undervaluation of companies which have not experienced influences of the</p><p>financial crisis.</p><p>The researchers found that this question must be answered positively.</p><p>The authors come to this result after they, in a first step, detected unaffected companies by</p><p>observing the key financial indicators (earnings, book value and operating cash flow) of the</p><p>600 constituents companies of the S&P 600 Small Cap Index during the time period from</p><p>2004 to 2008 (before and during the financial crisis).</p><p>In a second step the writers selected one company out of all unaffected companies and carried</p><p>out a valuation to find the fundamental (or intrinsic value) of this company. By comparing the</p><p>fundamental value of the company with its share price they found that this company was</p><p>undervalued.</p><p>In a third and last step the researchers discovered the indication that this undervaluation</p><p>results from investors' fear, as they could show that a confidence indicator that measures the</p><p>confidence of institutional investors correlates with the value of the S&P 600 Small Cap</p><p>Index but not with the financial indicators (in this case EBIT and Book Value) of the</p><p>constituents companies of the S&P 600 Small Cap Index.</p><p>Thus, the main research question if the broad fear of market participants leads to</p><p>undervaluation of companies which have not experienced influences of the financial crisis of</p><p>2007 – 2009 must be answered positively, as mentioned before.</p><p>Moreover, the hypothesis:</p><p>to 2009</p><p><em>Markets can be inefficient in the times of the financial crisis 2007, which the researchers established must be seen as true.</em></p>
| Identifer | oai:union.ndltd.org:UPSALLA/oai:DiVA.org:umu-24617 |
| Date | January 2009 |
| Creators | Blome, Andreas, Chabros, Martyn |
| Publisher | Umeå University, Umeå School of Business, Umeå University, Umeå School of Business |
| Source Sets | DiVA Archive at Upsalla University |
| Language | English |
| Detected Language | English |
| Type | Student thesis, text |
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