Article at a glance:

The irrational component of your stock price

• Market fundamentals explain share price fluctuations over the long term, but in the short term irrational investor biases and myopia can skew prices.
• These emotionally driven deviations in the markets can upset a company's strategic plans—if its managers don't understand what lies behind the deviations.
• The assumptions investors make about inflation and earnings projections are responsible for this skittishness.
• Moderate adaptations to a fundamental valuation model can help companies assess the impact of emotional investors.