Market Value
What It Is:
Market value refers to the current or most recently-quoted price for a market-traded security. It can also refer to the most probable price an asset, like a house, would fetch on the open market.
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How It Works/Example:
The market value of an asset is determined by fluctuations in supply and demand. It should be noted that market value represents what someone is willing to pay for an asset -- not the value it is offered for or intrinsically worth.
For example, say a person is selling their house for $300,000. However, no one is willing to buy the home for more than $250,000. In this case, even though the house is being offered at a higher price, its market value is $250,000.
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Why It Matters:
One of the most important factors when purchasing a security is its market value. Many investors (especially value investors) pick securities or assets based on disconnects between market value and what they perceive the security is worth, hoping they might have uncovered a future star for a discount price.
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Cached on February 4, 2012, 8:51 am