The Relationship between Discounts and Premiums and Value Investing Theory

The aim of this topic is to provide a different view on the theory of value investing through exploration of discounts and premiums. Method of discounts and premiums comes from the field of business valuation and answers the question, why the price of certain stock is overvalued or undervalued compared in contrast with an average. The first chapter of this thesis deals with general issues of value investing and method of choosing appropriate shares. The next section presents a theory of discounts and premiums. The last chapter tests a sample of stocks selected on the basis of the value investment approach and surveys that sample of stocks by the approach of discounts and premiums.