Independent thesis Advanced level (degree of Master (One Year)), 10 credits / 15 HE credits
The starting point of this Master Thesis have been utterances of well known investors during
the financial crisis which recommend to buy shares especially in the time of financial
downturn because one could buy good performing companies at a low price.
This arouse the question if broad fear of market participants during the financial crisis of 2007
to 2009 leads to undervaluation of companies which have not experienced influences of the
The researchers found that this question must be answered positively.
The authors come to this result after they, in a first step, detected unaffected companies by
observing the key financial indicators (earnings, book value and operating cash flow) of the
600 constituents companies of the S&P 600 Small Cap Index during the time period from
2004 to 2008 (before and during the financial crisis).
In a second step the writers selected one company out of all unaffected companies and carried
out a valuation to find the fundamental (or intrinsic value) of this company. By comparing the
fundamental value of the company with its share price they found that this company was
In a third and last step the researchers discovered the indication that this undervaluation
results from investors' fear, as they could show that a confidence indicator that measures the
confidence of institutional investors correlates with the value of the S&P 600 Small Cap
Index but not with the financial indicators (in this case EBIT and Book Value) of the
constituents companies of the S&P 600 Small Cap Index.
Thus, the main research question if the broad fear of market participants leads to
undervaluation of companies which have not experienced influences of the financial crisis of
2007 – 2009 must be answered positively, as mentioned before.
Moreover, the hypothesis:
Markets can be inefficient in the times of the financial crisis 2007, which the researchers established must be seen as true.
2009. , 80 p.