Sunday, 11 March 2012

Value versus Price - Two Perspectives on Worth

Value versus Price
Two Perspectives on Worth

Endtruth -- intrinsic valueillusion -- marginal opinion
Meansmethod of appraisal *auction mechanism
Institutionprivate contractspublic exchanges
Approachrational, logicalarational, emotional
Knowledgeeconomicspsychology, sociology
Principletheory of investmentad hoc, empirical
Resultvalue rangesingle price
Precisionhighly imprecisehighly precise
Accuracywithin value rangeoutside value range
Investmentreal assetsclaims on assets
Unitsoperating enterprisecommon stock issue
Data Sourcecompany reportsmarket-generated
Measurementabsoluterelative, comparative
Analysis Typeinvestmentportfolio of stocks
Analysis-Unitsone companycompare two stocks
Analysis-Timeone point in timecompare two times
Horizonlong-term (years)short-term (minutes)
Frequencysporadic, on demandcontinuous supply
Stabilityslow, small changesquick, large changes
Applicationindividual stock selectionstock trading
* In contrast, the method of anticipation emphasizes earnings growth for the sake of growth rather than the sake of value. Thus, it is not recommended for purposes of estimating value.

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