When people say that a specific industry is valued at whatever they say it’s valued at, how do they know that? Ex: “The global coffee industry is valued at $450 Billion”
In: 20
You have two types of valuations.
The book value is the value of all of the assets of a company/industry minus all of the liabilities (or debts) of those companies. That is effectively the present value.
The market price is what the market believes the future value of the company will be. That is based on the number of shares of a company times its price. That is effectively the future value.
When people trade stocks, they are buying a stock saying they think it is worth the market price, or they are selling it thinking that the market price is as high as it will be. When you have millions of buyers and sellers making agreements to transfer ownership, it evens out to a relatively stable price unless something affects the market value.
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