Looking at companies going bust, are they more likely to be on the up, or on the decline, in the years prior to ceasing to exist?
Possibly going through the roof actually, think enron, the many dot com stocks, babcock and brown, abc, centro etc etc.
The above mentioned stocks price rises had nothing to do with real earnings.
What I am talking about is companies that have strong "REAL CASH" earnings and for what ever reason become unloved.
But the essence of my original arguement remains the same, it takes along time for real value to build inside a company, But alot of investors want quick returns. to the point where they check the market constantly.
they want the speculation of other investors paying higher prices to generate their returns rather than the underlying assets generate their returns.
Lets take a real world example, Westfield group creates it's return by building and leasing shopping centres. a large chunk of it's profits come from longterm leases.
Using your example that shares mainly rise and fall along with the fortunes of the underlying company suggests that it's share price should be relativly stable. But it's not, it's share price moves all over the place for many reasons.
The westfield share price along with the market in general is often dragged up or down on data and news from around the world that has little affect of their day to day earnings.