The value of stock market: and the distortion of share price.

In today's economic environment, why has many Stock exchanges around world? According to Arnold (2008) defined “stock exchanges are markets where government and industry can rise long-term capital and investors can buy and sell securities.” Stock exchange and stock market will be used interchangeably.

For example, BBC news (2011) reported the shares of Tokyo Electric Power Company (Tepco) fell on the Tokyo Stock Exchange on fears that the utility provider may be nationalised. It was the most actively traded stock on the bourse, falling 12% to 186 yen.  Thus, the company asked the government for an extra 690bn yen ($9bn; £5.6bn) to help pay compensation claims. Furthermore, as the Financial Times shows that the head Mizuho Financial Group, Tepco, said the Japanese government's commitment to financially support Tepco for providing further lending. It can be seen from the Tepco face of the crisis, the Stock markets can help companies provide funding. If there is can not to loans on insufficient funds. It should be face collapse.

In addition, According to Financial times report the Petrobras, Brazil’s state-controlled oil Company, has sold up to $7bn of bonds on international markets, which Petrobras underlines the strength of Brazil’s equity and debt markets (Leahy, 2012). The listed company through this stock market to improve the company's funds, and can improve the situation of the company's operations.

However, the stock market has played vital role in the modern economy, also Arnold (2008) stated has a number of characteristics. There are inclusive the firm can find funds and grow; allocation of capital; for shareholders; status and publicity; mergers; improve corporate behaviour.

Despite the company by selling of $7bn in Brazil’s biggest international corporate bond offering, the following of company's shares soared in January this year. But following months in the doldrums, investors avoid the fear that less than Brazil’s stock market. As fourth quarter net profit down by half compared with a year earlier. Moreover, Leahy (2012) explained the company net profit in the three months to the end of December last year was R$5.05bn, down 52% compared with a year earlier and well below the R$9.2bn forecast by a Reuters analyst survey. In addition, Petrobras shares suffered their biggest fall in six months on the news and were down 7.16 per cent in afternoon trade at R$25.56 per share. In the same way, the Credit Suisse analyst of Leite (2012) also said “It could have been good but it wasn’t.”

Why the market price of the distortion? The share price fluctuations are base of the operation of stock, and by a variety of economic factors and non-economic factors. Arnold (2008) also disagreed that prices do not depart from true economic value, and claimed the most share deviate from true value, however, under the EMH that will expect the deviation to be random. Furthermore, How to solve the market price distortion may occur in the design of the stock option plan? The feasible way is to line the right price to determine the sale price and the stock to determine some sort of design. Be amended in order to avoid distortion of the market price of options granted, should be taken not only in determining the exercise price to market price when the options were granted as the only non-market valuation methods. On other hand, how a correct analysis of these factors? As result, the investors to make the right investment decisions, to examine the fundamental factors that affect the stock market price fluctuations. From different directions, directly or indirectly affect the profitability of the company's operating and stock and capital appreciation, income and psychological expectations from the different side effects, have a considerable impact on the stock market supply and demand.