Formalization of a new stock trend prediction methodology based on the sector price book value for the Colombian market

Abstract

As a financial indicator, Tobin's Q is related to making investment decisions based on the organization's market value related to the organization's replacement costs. The purpose of this study is to develop a methodology for predicting the trend of stock value based on the relationship between the fluctuation of Tobin's Q by sector as a trend index and the stock price variation of the Columbia stock market. To this end, a quantitative quasi-experimental survey will be conducted on shares traded by December 30, 2019. This is at least 90% of the time we have traded in the last 5 years. From the average Q value of the relevant economic sector, the value of each company's stock is adjusted to calculate the estimated price of the company's stock. If there is a disparity between the estimated value of the stock and the value at time t, you can forecast the stock price transition. If the computation yields a more significant result than what is now witnessed in the market, the next period's development will be positive; if it yields a lower result, its development will be negative. The results allow us to establish a significant influence of industry results on the performance of corporate Tobin's Q at the individual level. The significance level is greater than 50% in all cases, and profitability does not go below 30% in any sector, even reaching 100%. The methodology used in this study is essential to all investors tiny firms because it uses publicly available, freely available information, providing tremendous potential for safer non-business revenue.

Keywords

• Capital markets
• Tobin's Q
• Financial markets
• Corporate valuation
• Trend analysis
• Innovation