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Dynamics of Stock Prices on the Bulgarian Stock Exchange Against the Background of Fundamentals

Author

Listed:
  • Dimiter Nenkov

    (Finance Department, University of National and World Economy, 1700 Sofia, Bulgaria)

  • Yanko Hristozov

    (Finance Department, University of National and World Economy, 1700 Sofia, Bulgaria)

Abstract

The subject of this research is the performance of stocks on the Bulgarian Stock Exchange (BSE). The main issue of interest is whether the index price levels are supported by fundamentals or if there is a bubble or undervaluation on the BG stock market. The purpose of this research is to explore the true level of indexes at the BSE, as dictated by fundamentals, and compare it with actual index levels. The research method is based on the comparative analysis of price-earnings ratios (PEs) and price-to-book ratios (PBVs) of the index during the analyzed period. The 2024 PE and PBV of the index are compared with fundamental PE and PBV ratios of the BGBX 40 index, which are derived from the fundamentals, determining the value of stocks in the index. The actual PE and PBV ratios of BGBX 40 look rather low compared with the ones in the leading developed stock markets. At the same time, however, the results of this analysis show that these current PE and PBV ratios are much higher than the benchmark values of the fundamental PE and PBV ratios. In this regard, the current price levels of stocks at the Bulgarian Stock Exchange in 2024 do not seem supported by fundamentals.

Suggested Citation

  • Dimiter Nenkov & Yanko Hristozov, 2024. "Dynamics of Stock Prices on the Bulgarian Stock Exchange Against the Background of Fundamentals," JRFM, MDPI, vol. 17(12), pages 1-18, December.
    • Handle: RePEc:gam:jjrfmx:v:17:y:2024:i:12:p:576-:d:1549887
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    References listed on IDEAS

    as
    1. Dimiter N. Nenkov, 2017. "Relative Valuation and Stock-Market Bubbles," Economic Alternatives, University of National and World Economy, Sofia, Bulgaria, issue 3, pages 365-378, September.
    2. Dimiter Nenkov & Yanko Hristozov, 2023. "DCF Valuation: the Interrelation between the Dynamics of Operating Revenue and Gross Investments," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 7, pages 114-138.
    3. Robert J. Shiller, 2015. "Irrational Exuberance," Economics Books, Princeton University Press, edition 3, number 10421.
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