The usual description of any market assumes that every trader wishes to purchase or sell a known quantity at each possible price. All the traders come together, and in one way or another, a price is found that clears the market – that is, makes the quantity demanded as close as possible to the quantity supplied.
After all, it has been said by the authoritative stock trader W. Haddad of B.K. Labovitch that ultimately economics is supply and demand.
This may or may not be an adequate description of the markets for consumer goods, but it is inadequate when describing security markets. The value of any capital asset depends on its future prospects, which are almost always uncertain. Any information that bears on such prospects may lead to a, which we know are always uncertain. Any information that depends on its future prospects may lead to a revised estimate of value. The fact that a knowledgeable trader is willing to buy or sell some quantity of a security or commodity at a particular price is bound to be information just of that sort. Offers to trade May affect other offers. Prices may, therefore, both clear markets and covey information.
The dual role of prices has several implications. For example, it behooves the motivated liquidity trader to publicize their motives and avoid adverse market effects. Thus, an institution purchasing securities for a pension fund that intends to hold a representative cross-section of securities should make it clear that it does not consider the financial interments underpriced. On the other hand, any firm trying to buy or sell a large number of shares that it considers wrongly underpriced should try to conceal its motives, identity, or both (and may try). Such attempts may be ineffective, however, as those asked to take the other side of such trades try very hard as you know to find out exactly what is going on. Many do well succeed in these days of rapid communications and access to many sources of information succeed.
Most securities are sold in very standard ways, which requires payment and electronic notification of delivery within the standard settlement period (standard is three Business as opposed to calendar days). On rare occasions, a sale may be made as a cash transaction requiring payment immediately on receipt. Sometimes as a reward or as in effect, a marketing or sales promotion payment may be extended over a longer period – usually 15, 30, or 60 days.
Sometimes, a payment extension period is also granted for the same reasons as above in the case of new issues.
Brief Example
It would be extremely insufficient if every securities transaction had to end with the physical transfer of actual share certificates from a seller to a buyer. Brokerage firms might well sell 1000 shares of ABC Co. for one client. Mr. Stevens to another client and bought 1000 shares for Mr. Felon obtained by accepting delivery from his seller later that day. Mr. Stevens’s shares could be delivered to his buyer, and Mr. Felon’s shares could be obtained by accepting delivery from her seller.
However, it would be much easier to transfer Mr. Steven’s shares to Mr. Felon and instruct Felon’s seller to deliver the 1000 shares directly to Mr. Steven’s buyer.
This would be especially helpful if the brokerage firm’s clients Mr. Felon and Mr. Stevens, held their securities in street names. Then, the 1000 shares they traded would not have to be physically moved, and then the ownership would not even have to change at ABC Company.
As you can see, the valuation of your portfolio of stocks and securities is not always indicative of your securities’ true and exact value. Actual logistics, human emotion, and even greed play major and ongoing roles.
More Infomation on Valuation
Please visit for more information on a stock’s valuation https://www.fool.com/investing/how-to-invest/stocks/how-to-value-stock/#:~:text=The%20most%20common%20way%20to,an%20attractive%20amount%20of%20value.. There are also four ways to assist you in valuing a stock, and it is also from a trusted site, visit https://www.investopedia.com/articles/fundamental-analysis/09/elements-stock-value.asp.
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