请教lvl 1 notes book 4一个问题 stock, follow, price, likely, market

tishangrenji

An analyst estimates a value of 45 for a stock with a market price of 50, the analyst is most likely to conclude that a stock is overvalued if:

A. few analysts follow the stock and the analyst has less confidence in his model inputs
B.few analysts follow the stock and the analyst is confident in his model inputs
C. many analysts follow the stock and the analyst is confident in his model inputs

答案是b,能否解答一下

贺琳娜

这个是financial statement analysis那部分的题目把？ if more financial analysit followed the certain company, the financial statement prepared by this company will be more valuable to users. N of course when analyst is confident in his model inputs he gonna conclude that it is overvalue. analyst 觉得这个股票只有45快，市面上sale for 50当然是over value了，这个情况下我们要shor-sale. 不好意思我在学校的computer上，type Chinese is not so convenient. Hope this explanation can help somehow.

tishangrenji

nah this is the last sesstion of Book 4 of equity investments.

i just not quite follow your explanation. what is the impact for more (less) analyst follow the stock in term of over or undervalued stock?

s11833

Think it in this way.
The market price of the stock is 50 but you find that the price should be 45 after u have performed analysis. As such, the market price should be overvalued. consider the 3 MCs

A. few analysts follow the stock and the analyst has less confidence in his model inputs

- A is wrong. When the market price is overvalued, analysts should recommend a sell for the stock but not follow the stock. But the later part is not consistent to the former part. If analysts dont have confidence to what the models they have done, their conclusion here that the overvalue of market price will be vulnerable. Since vulnerability, most analysts will follow the stock. Here you can see the contradiction of the content of the sentence.

B.few analysts follow the stock and the analyst is confident in his model inputs

- B is correct. since analyst is confident to his finding, he will not follow the stock.

C. many analysts follow the stock and the analyst is confident in his model inputs

- C is wrong. Reason is similar to A.