There is an entire field of academic study dedicated to answering this question. While you may not be wrong, this is far from a settled issue. The confidence with which you make the assertion (in all caps even) doesn't really jive with the actual science being done here.
If you're interested, start with the efficient market theorem and work your way forward.
I understand what you are getting at, but what I meant (and I should have clarified, my fault) - by actual value, I mean current (i.e. not estimated or anticipated) value - rather, empirical value based on hard evidence (the books, preferably non-cooked version ;) ). The value that companies are traded at does not reflect their current value -- if it did, trading would be kind of meaningless, like placing bets on a finished race.
That said, you are correct - the free market basically determines a "real" anticipated value of a product, even though this value may be inflated or deflated by fear, hype, fake volume, other factors.
Not exactly. The strong-form efficient market hypothesis, for instance, suggests that the value of something in a unregulated and truly public market would fully capture all information in existence about a company.
The market is therefore a reflection of ACTUAL value, not anticipated value. The actual value.
Again this is a hotly debated hypothesis, but what the value of a company on a public market actually means is most definitely up for debate.
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Share prices DO NOT denote actual value
There is an entire field of academic study dedicated to answering this question. While you may not be wrong, this is far from a settled issue. The confidence with which you make the assertion (in all caps even) doesn't really jive with the actual science being done here.
If you're interested, start with the efficient market theorem and work your way forward.
I understand what you are getting at, but what I meant (and I should have clarified, my fault) - by actual value, I mean current (i.e. not estimated or anticipated) value - rather, empirical value based on hard evidence (the books, preferably non-cooked version ;) ). The value that companies are traded at does not reflect their current value -- if it did, trading would be kind of meaningless, like placing bets on a finished race.
That said, you are correct - the free market basically determines a "real" anticipated value of a product, even though this value may be inflated or deflated by fear, hype, fake volume, other factors.
Not exactly. The strong-form efficient market hypothesis, for instance, suggests that the value of something in a unregulated and truly public market would fully capture all information in existence about a company.
The market is therefore a reflection of ACTUAL value, not anticipated value. The actual value.
Again this is a hotly debated hypothesis, but what the value of a company on a public market actually means is most definitely up for debate.