Are Stock Market Prices an Accurate Reflection of the Value of Your Stock Portfolio?
The usual description of any market assumes that every trader wishes to purchase or sell a known quantity at each possible price. All the traders come together, and in one way or another price is found that clears the market that is, makes the quantity demanded as close as possible to the quantity supplied.
After all it has been said by the authoritative stock trader W. Haddad of B.K. Labovitch that ultimately economics is supply and demand.
This may or may not be an adequate description of the markets for consumer goods, but it is clearly inadequate when describing security markets. The value of any capital asset depends on its future prospects, which are almost always uncertain. Any information that bears on such prospects may lead to a, which s we know are always uncertain. Any information that depends on its future prospects may lead to a revised estimate of value. The fact that a knowledgeable trader is willing to buy or sell some quantity of a security or commodity at a particular price is bound to be information just of that sort. Offers to trade May this...