The value of a stock is based on the value of the company, but why that correlation?
Only thing I can see linking them is dividend, but that is just 3-4% Annually. What is preventing it from becoming a game of share market, like happens in crypto?
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It often isn’t, really.
The value of stock is loosely the present value of the company + the perceived future value of the company.
For some companies, things are pretty stable, the stock price is pretty stable, and the stock price is reasonably correlated.
For others, the company may even be currently operating at a loss and the perceived future value varies a lot based on many factors like positive or negative news and CEO shenanigans.
Some investors, like Warren Buffett, have been very successful at identifying businesses where the current stock value is less than the actual value of the company, so they buy the company, replace the management, make it profitable, and generate lots of wealth.
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