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Another way of phrasing that is the market cap is determined by the people who have the information, and resulting conviction, to put their own money on the ide

Another way of phrasing that is the market cap is determined by the people who have the information, and resulting conviction, to put their own money on the idea that the company may be worth that much. Further, the reason why the market cap works is because every transaction has a buyer and a seller. The seller believes the price they are getting is above what it should be, while the buyer believes it’s below what it should be. As a result, the actual price is a consensus between people who have very different outlooks on the company, and as such almost necessarily incorporates a lot of different, and likely non overlapping, information.

perl4ever 8y ago
"As a result, the actual price is a consensus between people who have very different outlooks on the company" A better word would be "compromise", since there is no consensus by definition. But another point is that I always think of the price of a stock as deceptively precise. If you measure anything in a scientific sense, there is an associated +/- uncertainty. The value of a company always has an uncertainty and it might be quite large as a percentage of the total size. So when you look at the price going up and down, maybe it's only fluctuating within the zone of uncertainty.