IntroductionInvestors' investment decisions are based on the stock valuation made before making the decision. Investors generally prefer to invest in undervalued stocks and sell their shares that they consider overvalued. There are many different methods for valuing stocks. Additionally, there are many factors that increase stock valuation risk. This document focuses on the fundamental analysis used to evaluate stocks. Fundamental analysis generally uses the price earned method, dividend discount model, or free cash flow model for valuing stocks. Instead, we focus on the factors that influence the stock market and stock valuation. Basic TermsShareShare is a security representing an equity interest in a company and indicating a claim on the company's assets and profits ("shares"). marketThe stock market is a market in which public companies issue or trade their shares. The stock market is also known as the stock market. The stock market is a crucial part of the economy as it offers companies the opportunity to receive capital from investors in order to give them some ownership of the company ("stock market"). Market Risk Market risk refers to the risk in which the possibility of an investor incurring losses due to some factors influencing the performance of the financial market. It may occur in situations such as recession, fluctuating interest rates ("market risk"). It is based on expected earnings rather than recent earnings...... middle of paper ......ets, Institutions & Money, 22, 1202-1216.Damodaran. (2006). Evaluation approaches and metrics: A survey of theory and evidence. Schwert. (2011). Stock volatility during the recent financial crisis. European Financial Management, 17(5), 769-805.Madura, J. (2011). Financial markets and institutions. (9 ed., pp. 263-293). Cengage Learning Co. Stock (n.d.). Retrieved from Stock Market http://www.investopedia.com/terms/s/stock.asp. (n.d.). Retrieved from http://www.investopedia.com/terms/s/stockmarket.asp market risk. (n.d.). Retrieved from http://www.investopedia.com/terms/m/marketrisk.asp required rate of return - rrr. (n.d.). Retrieved from http://www.investopedia.com/terms/r/requiredrateofreturn.aspHarper, D. (2010, 09 04). Using historical volatility to assess future risk. Retrieved from http://www.investopedia.com/articles/06/historicalvolatility.asp