You're absolutely right. The problem is that there are no market mechanisms at play in between valuations. The goal of IE is to base equity pricing on market

You're absolutely right. The problem is that there are no market mechanisms at play in between valuations. The goal of IE is to base equity pricing on market mechanisms as much as possible. In the absence of market signals, we essentially choose the simplest, most economically justifiable assumption. The alternative is to simply let the board or management massage the intraperiod valuations as they see fit which is less transparent and yields values that don't necessarily have a market basis. I guess the "real" assumption of IE is that market mechanisms are the fairest, most efficient pricing system.