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I'm not sure what you're stating to be "False." That stocks would be purchased without dividends? That's obviously true. Stocks need not have dividends to be va
by tabeth 9y ago
I'm not sure what you're stating to be "False." That stocks would be purchased without dividends? That's obviously true. Stocks need not have dividends to be valuable, only just have someone else willing to pay more than what you did.
Which brings me to the next point: this expectation you speak of is part of the irrationality. Suppose there was a company that publicly stated that it would never give out dividends, but it was making bank. People like yourself would assume at some point in the future dividends would be paid out and therefore what you stated would apply, even if no dividends were never paid out (assuming the company's trajectory and what not stayed the same).
You also seem to imply the "expectation" of the market is always correct or rational. We both know that's not true, either.
- zodiac 9y ago> Suppose there was a company that publicly stated that it would never give out dividends, but it was making bank. People like yourself would assume at some point in the future dividends would be paid out Why would we do that?
- tabeth 9y agoBecause there's uncertainty in the world. People lie, the world changes, etc. Company A says no dividends ever, while maintaining soaring stock prices. Company A fires its CEO and Company A gets a new CEO. The new CEO doesn't say there will be dividends, but you assume they'll turn around so you buy, etc.
- zodiac 9y agoWell then the value of that stock reflects the future dividends of that stock in that scenario, weighted by how likely that scenario is to happen. Not sure what your point is then.