Here it is, as promised a couple of weeks ago though it seems eons ago to me..they didnt tell me how tertiary life could be so hectic and all..read a very interesting article about the difference between top students and the Average Joe..urhh..digressing again!
Expectation plays a critical role in the financial world supporting your basic fundamentals with number crunching...even in my Economic class, i learned that the E subscript e, i.e. expectations, play a key mathematical role by being part of the equation for the determing the currency exchange..you may go..'Hey, so expectations play a part in my FX trades!' well, yah it is everywhere not only in the financial markets. Including your parents, external family members', friends, professors' Great Expectations of you...tell me about it!
So basically, the jizz of it all is such that if the market expect stock A's revenue to increase by 5% while the actual results is 8%, the share price would appreciate. On the other hand, if the posted revenue increased by only 2%, the share price would fall. In restropect, if the market expects stock B's revenue to decrease by 10% while the actual decrease was only 4%, the share price would increase. As such, if you are gonna tell me that if the revenue actually decrease by more than 10% the share price would drop you basically got the hang of it!
Market sentiments is very important esp with regards to expectations. As long as humans exist, there will exist -- the herd mentality.
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