Market Criteria (potential Price)
Some feel that if the stock is listed in a well organized stock market, with a large volume of transactions, the listed price will be close to the estimated fair value. This is called the efficient market hypothesis.
On the other hand, studies made in the field of behavioral finance tend to show that deviations from the fair price are rather common, and sometimes quite large.
Thus, in addition to fundamental economic criteria, market criteria also have to be taken into account market-based valuation. Valuing a stock is not only to estimate its fair value, but also to determine its potential price range, taking into account market behavior aspects. One of the behavioral valuation tools is the stock image, a coefficient that bridges the theoretical fair value and the market price.
Read more about this topic: Stock Valuation
Famous quotes containing the words market and/or criteria:
“To market ‘tis our destiny to go.”
—Robert Frost (1874–1963)
“We should have learnt by now that laws and court decisions can only point the way. They can establish criteria of right and wrong. And they can provide a basis for rooting out the evils of bigotry and racism. But they cannot wipe away centuries of oppression and injustice—however much we might desire it.”
—Hubert H. Humphrey (1911–1978)