A model for overreaction to EPS shocks in the stock markets
- Eslami Bidgoli, Ghalibaf Asl, H Aliasgari
- Proceeding of System Dynamics Conference
Steel making is an energy intensive industry and for this reason, energy prices, especially oil and natural gas prices, have an important effect on this industry. In 2008, the sharp rise of crude oil as well as iron ore price caused the sharp rise of steel price because of the rise in prices of key production factors. But Iran's producers experienced almost no rise in their production factor prices especially key factors of energy and iron ore prices. As a matter of fact, inexpensive energy and iron ore are competitive advantages of steel makers in Iran because the huge natural resources of the country let the government to provide inexpensive production factors for the industry. But these inexpensive factors have some side effects that one of them is on the stock price of steel makers in stock market. In this paper we are to model the effects of fluctuations in world steel price on stock price of one of Iranian steel producers. In the end, we will offer some policies to mitigate the fluctuations of stock prices.