and Microsoft, as examples), which was spurred by decisions based in the Castles in the Air Theory, led to general stock market growth. In contrast, the crash of the Internet IPO Bubble, which also was an outcome of investment decisions based in the Castles in the Air Theory, led to wide-based decline in stock market prices.
Equity stock investment decisions explained by the Firm Foundations Theory consider the fundamental characteristics of an equity stock and the company behind that equity stock. These fundamental characteristics include (a) the degree of risk associated with the company and its industry, (b) dividend payment levels and consistency, (c) projected growth rate of net income, (d) the future value of the company based on a realistic discount rate, and other factors. Such analyses determine an intrinsic value for an equity stock, and market prices tend to fluctuate in a relatively narrow range around this intrinsic value (Malkiel, 1
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