In a more predictable world, stocks would be easy to price. A share gives its owner claim to a series of cash flows, such as dividends and earnings. Investors would forecast the future value of each, then discount it to a present value based on prevailing interest rates, the riskiness of the cash flow and their own risk appetite. Add them all up, and that would be the stock’s price.
In a more predictable world, stocks would be easy to price. A share gives its owner claim to a series of cash flows, such as dividends and earnings. Investors would forecast the future value of each, then discount it to a present value based on prevailing interest rates, the riskiness of the cash flow and their own risk appetite. Add them all up, and that would be the stock’s price.
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