3 ms·
> If the market had already priced in all future events, the price would never move. I don't think that holds. Let's say we all knew everything about the futu
by dllthomas 7y ago
> If the market had already priced in all future events, the price would never move.
I don't think that holds. Let's say we all knew everything about the future, and we all use it to instantaneously and perfectly compute The Right Price for every security. We all know that this stock will pay out a total of $X in dividends over the next Y years before the company goes out of business, and what all the future prices will be. Time moves forward, we pass a dividend payment. I think the price of the stock has to fall?
- JMTQp8lwXL 7y agoBut since you know everything about the future, you already know that the company will pay future dividends. That would be instantaneously priced in to your perfect information scenario.
- deleted 7y ago[deleted]
- dllthomas 7y agoThe dividend payment isn't unexpected - we all knew it would happen on that day. But since it's in the past now instead of the future, the stock is going to be paying out ($X - $d) instead of $X in what remains of the company's life.