|
| |
Stock price formation
Introduction:
Stock prices are not efficient in the sense that they are the best possible
estimate about company value. If that was true nobody would care to make costly
analysis trying to determine the fundamental value of the company and if nobody did
that then surely the stock price would not be priced at all but would drift
completely arbitrarily without any relation to its fundamental value. We know
neither of these two scenarios is true. The stock price that can be observed in the stock
market is not an accurate measurement of the firm's fundamental value nor is it completely unrelated to
this value. The following paper and exhibitions
present a simple theory to explain how stock prices are formed in
different kinds of market situations.
Contents
|
