MUTUAL FUNDS AND CORPORATE STOCK SELECTION

Abstract

The objective of this study is to identify the stock valuation and selection systems applied by European equity fund managers when selecting ordinary shares. It also includes examining the most significant micro and macroeconomic factors as well as economic indicators when investing in common shares. Additionally we present and review academic principles of corporate stock valuation and selection in order to provide background and tools helpful for prudent investment decision We conducted a survey among ten European equity fund managers across Austria, Great Britain and Sweden. The results indicate that no single stock valuation method is applied in isolation. The combination of available approaches is the option in use with respect to the fund objective. The most important factors or indicators when selecting ordinary shares are: the firm’s financial situation, the shareholder value policy, the business climate index, the firm’s expected earnings, the sales development and future demand trends. We also found evidence that qualitative business assessment is essential in corporate stock and firm valuation. Therefore, we argue that more efforts should be directed into this valuation area..