MANAGEMENT is efficiency in climbing the ladder of success; LEADERSHIP determines whether the ladder is leaning against the right wall - Stephen Covey

Thursday, October 06, 2005

Did u know about Clientele Effect?

Clientele Effect is where a company's stock price will move according to the demands and goals of investors in reaction to a tax, dividend or other policy change affecting the company. The clientele effect assumes that investors are attracted to different company policies, and that when a company's policy changes, investors will adjust their stock holdings accordingly. As a result of this adjustment, the stock price will move.

Consider a company that currently pays a high dividend and has attracted clientele whose investment goal is to obtain stock with a high dividend payout. If the company decides to decrease its dividend, these investors will sell their stock and move to another company that pays a higher dividend. As a result, the company's share price will decline. So, maybe before u perform a stock-pick next time, be aware of the "Clientele effect" theory and pick your stocks with caution. That being said, I always believe that u cant beat the markets by being a 'Theoretical Financial Wizard'.....U CAN beat the market only by understanding the MARKET SENTIMENT and making THAT VERY SENTIMENT work for u...Good luck & happy investing!


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