Predicting market price changes has been a major challenge over the years. Stock market prices are often affected by many factors including internal and external factors. According to the efficient market hypothesis, stock prices are affected by all the available information (Hamid et al., 2017). This stipulates that whenever there is a change in the available information, the stock market prices are likely to increase or decrease according to how the changing factor is perceived to influence business. It also makes it more difficult for investors to gauge the changing market prices for the shares (Rossi and Gunardi, 2018). Their decision must be made before these major changes are likely to influence stock market prices. This paper seeks to technically analyze Wizz Air Company, focusing on how efficient market hypothesis affected the price ranges for the company.
The capital assets pricing model is mainly used to determine the return on the stock. It compares the relationship between expected returns and systematic risk. It is used widely to price risky security and generates expected returns while comparing the expected returns on the stock with the asset’s capital. According to the formula of calculating CAMP, the investors expect to be compensated for their time value of money and for taking additional risk (Andrei, Cujean and Wilson, 2021). The formula uses the beta component to gauge how the risk will affect stock market prices. If the stock is riskier than the market, the return will be higher than when the market is riskier than the stock (Kuehn, Simutin and Wang, 2017). CAMP is important in determining whether a stock is fairly valued compared to the risk and the time value of their money.
CAMP can effectively gauge the changes in stock market prices for Wizz Air Company over the period between 2018 and 2019 financial years. According to the provided information on the financial report during this period, on 20th May, the market price for the stock was 3,465 shillings. The open value was 3,095 shillings, meaning that if one was to buy the stock at this period without considering systematic risk on the likely returns, then the lowest the investor could buy the stock was at 3095. The highest value was at 3480, meaning that if the stock was riskier than the market, the highest the investors could pay for the stock was 3480. On the other hand, if the market was riskier than the stock at this time, the lowest one could pay for the stock was 3078. This means that it was likely unwise to trade your stock during this time as the information available was likely to predict less return than returns on the higher side.
Moreover, efficient market hypothesis played a role in the stock prices between the 2018 and 2019 financial years. In May 2018, the stock prices were valued at 3465; the next month, the prices were relatively the same as there was only a difference of fewer than 50 shillings. However, in September of the same year, the market prices lowered tremendously, going at 2568. According to the efficient market hypothesis, the stock market changed because of knowledge known to the public that predicted a reduction in business activity for the company making the likeliness of the corporation making profits during this period to be lowered (Singh, Babshetti and Shivaprasad, 2021). Selling your shares at this moment will come with a high price to pay though no one knew how the changes in market prices would follow after this period passed. One will gain more by buying shares since there is a likelihood that the market prices will rise after the period elapsed.
On the other hand, the stock prices rose by June 2019, indicating a positive change in the company’s circumstances. The rise in prices could have been influenced by some positive information released to the public. This information that the public viewed as one that will make Wizz Air Company trade more, leading to a high market value for their stock (Tokić, Bolfek and Radman, 2018). This period was the best trading time for those investors who were willing to sell their shares, especially those who bought them in September of the previous year. They will gain approximately 1000 for trading their shares a year later. However, it would be more expensive for investors seeking to buy shares with the company. It would be riskier in both situations because for those selling their shares, there is a potential of the market prices going further up, which would make them more money or lower, which may be less profitable. Those buying at this period were also taking a risk as there was a possibility of the market prices lowering, leading to fewer returns or rising, leading to more returns.
Wizz Air award and the launching of the Budapest pilot academy positively affected their stock market prices. The company received an international award for being the airline company that provides airline services at lower prices compared to the others. The award was given early in 2019 for their achievement in 2018. Their stock prices had gone very low in September 2018, and after they were named for this award, their prices started rising steadily. The public viewed this information as good news, which predicted that their business activities would likely increase after the award (Kelemen et al., 2019). Moreover, in the same year, they launched their pilot academy aimed to nurture local talents while focusing on providing competent staff members (Tol, 2018). This was also positively viewed by the community and led to increased market prices.
Wizz Air was majorly affected by bad news in 2018, leading to a decrease in their stock market values in that year. The company changed its traveling schedule in July the same year, which shifted most of the planes to travel to London, leading to a negative perception by the customer (Pilát et al., 2018). This negatively affected Wizz Air market prices, leading to lowering most of their prices. Moreover, there was a major concern about their punctuality in august (Tłoczyński, 2018). This led to most passengers shifting to other airlines affecting their market prices negatively. These two incidences contributed to the fall in market stock prices to 2568, which was very low compared to the rest of the season. The major losses were on the shareholders who wanted to sell their shares during this period.
In conclusion, bad or good news has a major impact on the stock market prices. Major transactions should be done during these difficult times influenced by the news to get returns on your stock with any company. During this time, an investor can buy or sell shares to maximize benefit. This period might also be costly to the investors as major losses may also be made. Moreover, CAMP helps determine the returns on the stock during this time, ensuring that investors get a fair price on the shares they sell. A good investor must be willing to take risks to rip maximum benefit from their investment.
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