Managing the market's mood swings

Behavioral-finance theory suggests that irrational investors can over- or undervalue shares and that rational investors can't always correct these mistakes immediately. Our research, however, suggests that such discrepancies aren't common enough to affect financial decision making in a major way. Significant deviations from a company's intrinsic value are rare, and markets soon return to economic fundamentals. For more details on how executives should manage the market's mood swings, read "Do fundamentals—or emotions—drive the stock market?"

This article is one of several adapted this month from the fourth edition of Valuation: Measuring and Managing the Value of Companies.

Measuring long-term performance
Investors and executives closely track the share prices and earnings of companies—metrics that often reveal little about their health. A comprehensive performance assessment can measure not only the value they have created but also their potential to create more. (Premium)

A silver lining in the US trade deficit
The US current-account imbalance is bigger than ever. You may be surprised to learn that the successful expansion of US multinationals is a major contributor.

The right passage to India
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Governing joint ventures
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Don't expect too much of your share price
To align the market's perception of a company's worth with its actual value, executives must understand how investors define value. (Premium)

The next wave in US offshoring
Skill-intensive manufacturing sectors have yet to shift their production overseas, but they are likely to do so over the next ten years.

The view from the boardroom
A McKinsey survey of directors shows that they're tired of playing defense.

A credibility gap for marketers
CMOs should know how the organization perceives them and alter their approach accordingly.

The demographic deficit: How aging will reduce global wealth
To fill the coming gap in global savings and financial wealth, households and governments must not only increase their savings rates but also earn higher returns on the assets they already have.