Quote:
Originally Posted by ratbastid
Only the same way the atomic clock in Denver "reflects" the passage of time. But the fact is, a second as we define it hasn't actually passed until that clock says so.
The stock market DEFINES the value of companies. To say it "reflects" something in the real world beyond the emotional gut-level hunches of those engaged in it is absurd.
Plus, those who are watching the market closely right now for signs of economic indication aren't AT ALL looking at it in the long term.
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The key difference is that time is an objective measurement. Value is subjective. People will measure value in different ways and even individuals will put higher or lower values on items that constitute a company. However, long term, risk adjusted returns clearly get reflected in the market. When anomalies develop in risk adjusted returns, market participants will move in to exploit those anomalies. As more and more market participants exploit the anomalies the anomalies go away, bringing us back in to balance. Nature seek balance, markets seek balance.