Stock Image

The missing link between value and price.
The stock image as a stock profiler's tool


The stock image coefficient measures the bridge span between
the stock economic value and its market price.

This deviation is caused mostly by psycho-sociological elements
(the human factor).
To simplify it is a love / hate coefficient.

To detect this deviation - and the "stock profile" that investors
perceive accordingly - helps estimate potential stock prices.


pont Bridging economy and finance,
and more precisely

sous
stock fundamentals and brain investors' sentiment.

What does this coefficient measures?

If stocks have a soul, can it be weighed?
=> It seems investors do it, so better know how they do !

Stock prices, this is not a secret, often do not match fully the state of the
economy and of the listed companies.
The "human factor" influences the supply and demand on the stock
market (and on other markets of course).

The stock image is a coefficient that tries to take it into account

It is a parameter that
measure measures
the influence of psycho-sociological factors on stock prices.
We could say more simply that it measures the market
love love or aversion towards the stock.
Investors have their little
heart, you know!
That parameter is used mostly for stock valuation, as a practical
application (or better said, a foreboding, as it was anterior) of
behavioral
economics.

As seen in the
stock valuation article, it is a coefficient that links the
fundamental value (*) of a stock to its market price
.

(*) aka economic value or intrinsic value or theoretical value,
      choose the phrase you like!
  • Stock price = Economic value x Image coefficient
Or
  • Image coefficient = Stock price / Economic value

How the measure is done

First, dress as a financial analyst and find the economic value

The above formula shows that in order to find the image of a stock, the
first step is to calculate (*) the stock economic / fundament
al value
(see
financial analysis basic tables).

(*) Or better say, "estimate it", as there is always some uncertainty in
      the economic projections that are used to determine the fundamental
      value.
This value is based on a thorough microscope analysis of the company
situation and of general economic evolutions, with a rational
appreciation of
telescope   future returns and risks.
Once this analysis is done, and the EV - Economic Value is estimated
accordingly, then the market price is the other key data to enter into
the above equation to find the image coefficient.
For example

If the EV is 45 Euros
and the market price 58 Euros
=>
the image coefficient is 58/45 = 1.29.


Well, above 1, investors seem to like that stock.


OK, this is just a static approach, what is important also is
the potential variation range of this coefficient, as seen
below.

Image coefficient éventail range

Whatever the "efficient market hypothesis" believers tell us,
the market price is rarely equal to the fundamental value.
=>
In other words the image coefficient is nearly never equal to 1.

Typically, its value is between .3 and 3, depending on what perceptions
investors have collectively, at a given moment, about the stock, the market
and the economy.

This "behavioral" coefficient.
  • Varies plancalend in time, between bearish and bullish market periods.
  • Also differs from one stock to the other,
as related to the investor feeling  averserepeal attitudes towards
the stock

Stock images, stock profiles 
and image categories

Every stock has its own psychological "profile",

It translates into its own image coefficient range:
Minimum / structural / maximum image.
  • That range (minimum / maximum image) is either
- Broader than the market average range in the case, usually,
  
of volatile stocks with hard to assess prospects.

  The ambiguity is that this broad range can signal prospects
   that are either
very promising or highly disastrous, as their
   scope is far from
visible.

- Narrower, usually, for highly safe but eventless ones.
  • The pivot (structural image) is
- Higher for stocks enjoying a favorable investor attitude,

- Lower for those against which they have reluctance or aversion.
  • Groupings could be made between stock categories.
You can find details about them, not by
following a profiler seminar in Quantico,
but in my
Stock profiles page.

Those categories help to estimate the image range of a specific stock
We can have for the XYZ stock as an example
 .75 as the minimum image
 1,2 as the structural image
 1.7
as the maximum image

What it is used for

The image coefficient range is a stock valuation tool that helps analysts
and investors to estimate the potential value range of a st
ock.
=> A specific method of fundamental and behavioral financial analysis /
          valuation that uses the stock image  is shown in the
         
financial analysis tables
          Also our stockpricer can be used.

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M.a.j. / updated : 19 Aug. 2015
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