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We statistically investigate the distribution of share price and thedistributions of three common financial indicators using data fromapproximately 8,000 companies publicly listed worldwide for the period2004-2013. We find that the distribution of share price follows Zipf's law;that is, it can be approximated by a power law distribution with exponent equalto 1. An examination of the distributions of dividends per share, cash flow pershare, and book value per share - three financial indicators that can beassumed to influence corporate value (i.e. share price) - shows that thesedistributions can also be approximated by a power law distribution withpower-law exponent equal to 1. We estimate a panel regression model in whichshare price is the dependent variable and the three financial indicators areexplanatory variables. The two-way fixed effects model that was selected as thebest model has quite high power for explaining the actual data. From theseresults, we can surmise that the reason why share price follows Zipf's law isthat corporate value, i.e. company fundamentals, follows Zipf's law.

Zipf's law for share price and company fundamentals