> The stock market is fundamentally a gambling exchange too, but it provides valuable information about the economy for free, funded by the gamblers taking part

> The stock market is fundamentally a gambling exchange too, but it provides valuable information about the economy for free, funded by the gamblers taking part. A stock exchange is no more a gambling den than a flea market is, although one may choose to engage in speculative activities at both. I feel it's also a stretch to say that an equities market provides information about the economy. The information produced by trading activity on a stock exchange is principally indicative of what price people are willing to trade given stocks at. Without augmenting the transaction data with other sets of data (company fundamentals, economic reports, etc.), it's hard to draw meaningful conclusions about the economy from these transactions alone. If you consider the valuation of a stock according to a standard modeling technique (DCF), in which the price paid for a stock is equal to the net present value of all future cashflows, you can see how a change in a stock's price may indicate nothing at all about current economic conditions. Consider, for example, a company that is prohibited from selling widgets for a year due to a patent dispute with another firm. The price of that company's stock will fall, even though we know nothing about levels of widget consumption in the economy.