... and in the same industry react differently. Some prices go down 0.2%, whilst others go down 2%. Stock prices of different companies have diverse sensitivities or elasticity's towards interest rates and earnings estimates. To explain why this occurs stock valuation models are utilized. Stock valuation models show the value per share for each stock. The value of a stock is the sum of income you expect to get in each future year discounted at the discount rates for those years. One method of stock valuation is The Dividend Discount Model in which all future dividends are forecasted and the discounted back to present day value. Stockholders receive dividends as a reward for investing their capital into the corporation. The price they are willing to pay for these shares should be equal to the reward they are going to receive. However, since they are going to receive the reward over a ...

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