Impact of stocks Intrinsic value in rationalizing financial investment decisions in Iraq Stock Exchange

Abstract

Abstract

Stock valuation is one of the most important issues in investment management. Investors and shareholders can evaluate their shares based on stock valuation models and make decisions about stock trading accordingly. This study attempts to answer the question: How appropriate are stock valuation models in evaluating the studied stocks and what is their role in rationalizing the financial investment decision in the Iraqi Stock Exchange? This is to reach one aim, which is identifying the role of evaluating the stocks traded in the Iraqi Stock Exchange and the market value of the stock, and whether it has an inflated pricing or a reduced pricing by comparing it to its real value. This works to rationalize the investment decisions of individual investors and institutions that invest in stocks, because of its importance that deserves study, attention, analysis and follow-up, especially the stock evaluation of companies listed on the Iraq Stock Exchange, where a sample of 52 stocks are applied on during the study period (2015-2019).

The study reached a number of conclusions, the most important of which are: The final results of the fair value based on the profit multiplier and residual income model have a positive sign, and this indicates that there is a direct relationship between stock valuation models and rationalization of financial investment decisions of the stocks traded in the market. As for the accounting evaluation model and the neutral ascertainment model, the results are negative, and this indicates that there is an inverse relationship between stock valuation and rationalization of financial investment decision-making, as well as a relationship between stock valuation models and investment decision-making. Therefore, the investors managing the market and the Securities Commission should care about market revitalization through the information disclosed by the listed companies. This includes activating investment in the Iraqi Stock Exchange. The researcher recommends that it is important to search for stock valuation models and test their validity and ability to predict the real value in order to make sound investment decisions and apply them to the shares of companies and banks listed in the Iraq Stock Exchange.