Value versus Price - Two Perspectives on Worth

Value versus Price

Two Perspectives on Worth

	VALUATION	PRICING
End	truth -- intrinsic value	illusion -- marginal opinion
Means	method of appraisal *	auction mechanism
Terms	case-by-case	standardized
Institution	private contracts	public exchanges
Approach	rational, logical	arational, emotional
Knowledge	economics	psychology, sociology
Principle	theory of investment	ad hoc, empirical
Result	value range	single price
Precision	highly imprecise	highly precise
Accuracy	within value range	outside value range
Investment	real assets	claims on assets
Units	operating enterprise	common stock issue
Data Source	company reports	market-generated
Measurement	absolute	relative, comparative
Analysis Type	investment	portfolio of stocks
Analysis-Units	one company	compare two stocks
Analysis-Time	one point in time	compare two times
Horizon	long-term (years)	short-term (minutes)
Frequency	sporadic, on demand	continuous supply
Stability	slow, small changes	quick, large changes
Application	individual stock selection	stock 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.