Intrinsic Value
An estimate of a stock’s
“true” value based on
accurate risk and return
data. The intrinsic value
can be estimated but not
measured precisely.
Market Price
The stock value based on
perceived but possibly
incorrect information as
seen by the marginal
investor.
Marginal Investor
An investor whose views
determine the actual stock
price.
Equilibrium
The situation in which the
actual market price equals
the intrinsic value, so
investors are indifferent
between buying or selling
a stock.