Questions tagged [price-theory]
Relating to the formulating of prices for investments or the determination of equilibrium or optimal prices for goods & services.
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Does the assumption that all known facts are already priced into the share price assume that most participants of the stock market are well-informed?
It is often assumed that share prices automatically consider all available information since if some market participants have more information that implies that a share is, for example, underpriced, ...
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Rationale behind market weighting in ETFs / indices
From what I understand, most global ETFs use weighting based on capitalization; so for instance there are more US stocks than European stocks in them because the US is a larger market than Europe. If ...
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Best way to determine price of an asset based on set of seller and buyer offers?
Lets say we have a fungible asset (stocks, gold, currency, crypto, etc.) that is freely traded on a market. The way this works is that people can submit buy and sell (bid and ask) offers. If a sell ...
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Is there a way to tell what price a stock will be before the market opens?
I was reading about an Atlassian security vulnerability and was curious as to the effects on its stock price. Surprisingly, its stock price over the past 5 days was up 6.83%!? But I checked and Monday ...
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Why do people who sell something on a marketplace ever allow the price to go down?
This question really goes for any kind of "financial instrument" or whatever the generic term is, but I'm going to mention Bitcoin as an example.
I fundamentally don't understand why, once ...
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How are market rallies "fueled by sellers", and market sell-offs "fueled by buyers"?
I am looking at Trading the Measured Move by David Halsey. In chapter 5 Using Multiple Time Frames to Trade, section Trading the Trend, page 85:
Why Do Markets Continue to Make New Highs?
Markets ...
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Financial astrology: How do the movements of celestial objects affect the stock market?
I noticed that there are many published research papers about financial astrology. There's also a book published by Wiley: A Trader's Guide to Financial Astrology: Forecasting Market Cycles Using ...
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Competitive Market Analysis when have to extrapolate price per acre and price per square foot of building?
I am looking to buy a house in rural San Francisco Bay Area and I am trying to carry out Competitive Market Analysis on my own.
Unfortunately, in the area where I have found one house that interests ...
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Bond price in crises
How do bond prices fall in a crisis as of course credit spreads will go up generally but also interest rates plummet meaning surely the bond price rises at the same time?
Does this effect cancel out ...
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Price discovery and index funds bubble
I have read an article and watched a couple of videos about a possible index fund bubble.
One of the arguments to justify this bubble is (if I have understood it correctly) that a very huge ...
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Assumptions in Conventional Finance
These are the 3 main assumptions used in Conventional Finance:
Price of assets are correct, ie equal to it's intrinsic value
Resources are allocated effectively
World is fair and so are the market (...
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Order Book - Does the price (ask or bid) depend on the size of the order?
I still haven't quite grasped the concept of order book. In fact I still have a few questions like the one in the title.
I understand that in a market, at any given time, there is a list of pending ...
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Why does the iShares EEM ETF have a higher expense ratio than similar ETFs like VWO?
Why is iShares able to charge more for EEM in comparison to VWO (a very similar ETF)?
Investors/Traders are mostly institutional and in general, these entities have more insight (though simple ...
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How come stock price increase doesn't result in a volume increase as well?
If the stock goes up it means that more people are buying it right? So volume should be increasing along with stock price increase and vice versa, but that's not what is happening, why?
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Theory/Strategy for pricing by volume
I don't know if this is the right SE site for this question. If not please advise. I found a "price-theory" tag, but if there are other relevant ones, please feel free to add them.
I'm running a ...
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compromise between 100% insurance and no insurance? (long term view)
Assume you can get private health insurance for different premiums, and they cover any directly health related costs (hospital stay, needed medicines, physiotherapy etc.) up to a maximum amount. It is ...
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Why doesn't the market capitalization of a company match its acquisition price during a takeover?
Amazon bought Whole Foods for $13.7B, but Whole Foods' market capitalization jumped to $17.6B. How are the shareholders of Whole Foods going to ultimately compensated? Do their shares turn into cash,...
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What is meant by "priced in"?
I've been trying to wrap my head around the idea of stocks with future earnings/value "priced in". How does this work exactly, with a fund. Does some manager look at the possible earnings ...
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What does it mean to find the Present Value of a FRA?
What does it mean when the present value of a forward rate agreement is calculated? Is this a price that the owner of the FRA can sell it for?
Thanks for the help.
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Are there any methods to calculate the % of position size to cover my profits based on achieving expected returns and thereafter?
Perhaps modifying Kelly Criterion to gauge the % of bet size to cover and adjusting to a new expected value? I want to let my profits run without exiting the trade prematurely. (or should I just ...
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How Is the Price of a Stock Determined? [duplicate]
From what I understand, the stock price is based on supply and demand. For example, if a stock that was priced at $0.01 was bought buy an investor who spent $5.00 (leaving him with 100 shares), it ...
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Which r in perpetuity formula to pricing a business?
I am trying to guess a price to sell my small business. I don't understand a thing in the perpetuity formula. Which is the correct rate I have to put on it?
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Why government bonds fluctuate so much, even though interest rates don't change that often?
Why do government bond prices fluctuate on a daily basis on the bond market?
I can understand the fluctuation of corporate bonds because they are tied to the credit worthiness of the company and ...
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Multiple people interested in an Apartment
I own a four family building which I am actively renting.
Every time I go to rent it I raise the rent slightly and I check the comparables in the area to make sure I am still not pricing myself out ...
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Why does a call option's price increase with higher volatility?
As per the Black-Scholes model, the value of a call option is directly proportional to the volatility. Without getting into the derivation of the BS equation, is it possible to intuitively understand ...
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