The Current Beta for the Stock in Amazon - Essay Example

Now in regards to whether or not a company’s earnings have a bearing on the stocks increase or decrease, it is important to understand that just because a company may announce that its earnings have increased, this does not necessarily mean that the stock in the company will increase. There have been many times when a company will announce that their earnings have increased: yet, their stocks have fallen. This is because the actual earnings did not turn out as the market thought that they would (AAI journal, 2010).

            Whether or not a company’s stocks rise is not based on the earnings of a company; rather, they are solely based on expectations. If the market expects that a company does well, then the company’s shares are going to rise. If the market thinks that the company is going to fall, then the shares are going to fall. Sometimes, the company can do unexpected things, proving the predictions of the market wrong. For instance, if the company earns more than what was expected, then the company will have proven the market wrong. Then there is the case when the company will expect that a particular company will have high earning; however, this is not the case. This happened with the Lehman Brothers investment firm. The Lehman Brothers investment firm was expected to have high earnings; however, this was not the case. The earnings were far lower than the market expected they would be (AAI Journal, 2010).