There are, besides earnings and dividends, other recognized market influences. First, by altering the return from financial instruments that compete with common stocks, and second, by changing the cost of funds needed to conduct business. Rising rates depress stock prices. Usually negative, particularly in the short term. Each factor is at least partly independent of the others, so stock prices are likely to be influenced by more than one variable.
Several mechanisms are available for processing market data.
One of these, linear regression analysis, is particularly suitable for weighing factors that can plausibly influence stock prices. It assesses mathematical relationships among variable factors that are not open to exact solutions. Gordon W. Neal, a retired mechanical engineer, is a graduate of the University of Nebraska who has spent a major part of his career doing economic analyses of engineering projects. All rights reserved. Inc. All rights reserved.