Method of recovering the real value of a stock from the stock pricing data

摘要

A method of recovering the real value of a stock from the stock pricing data collected in a stock market and related ways of selecting stocks in the market are described. The method involves the steps of separating stock pricing data into two components. The first one represents the real value of a stock because it is firmly linked with financial fundamentals of an underlying enterprise. The second one is a random function of time, herein referred to as the noise wave of a stock. The real stock value is represented by a function of time, herein referred to as the value function of a stock. The value function of a stock represents the trend of appreciation of a stock in a stock market. The growth rate of the value function of a stock is introduced as a measure of appreciation of an investment in a stock. A measure of risk of an investment in a stock is introduced as a function of ordinates of the noise wave of the stock. An integral indicator of investment value of a stock is introduced and proven effective for selecting individual stocks or components for a portfolio of stocks.