A Market-based valuation is a form of
stock valuation that refers to market indicators, also called extrinsic criteria (i.e. not related to economic fundamentals and account data, which are intrinsic criteria).
Examples of market valuation methods
Technical analysis
Technical analysis
In finance, technical analysis is an analysis methodology for analysing and forecasting the direction of prices through the study of past market data, primarily price and volume. Behavioral economics and quantitative analysis use many of the sam ...
is the most characteristic market-based method, although it focuses more on timing than pricing.
Also, rough market comparison tools such as the
PE ratio
Pe may refer to: Physical education
Language
* Pe language
* Pe (Cyrillic), a letter (П) in the Cyrillic alphabet
* Pe (Semitic letter), a letter (פ ,ف, etc.) in several Semitic alphabets
** Pe (Persian letter), a letter (پ) in the Arabic ...
and the
PEG ratio The 'PEG ratio' ( price/earnings to growth ratio) is a valuation metric for determining the relative trade-off between the price of a stock, the earnings generated per share (EPS), and the company's expected growth.
In general, the P/E ratio is h ...
are used. More sophisticated forms of analysis (
fundamental analysis,
quantitative analysis, and
behavioral analysis
Behaviorism is a systematic approach to understanding the behavior of humans and animals. It assumes that behavior is either a reflex evoked by the pairing of certain antecedent stimuli in the environment, or a consequence of that individual' ...
) use also some market criteria, such as the
risk premium
A risk premium is a measure of excess return that is required by an individual to compensate being subjected to an increased level of risk. It is used widely in finance and economics, the general definition being the expected risky return less t ...
or
beta coefficient
In finance, the beta (β or market beta or beta coefficient) is a measure of how an individual asset moves (on average) when the overall stock market increases or decreases. Thus, beta is a useful measure of the contribution of an individual ...
.
Those criteria might be "tilted" in some valuation models in anticipation of their possible variation in the next future, or to adapt them to their historical statistical range or
mean
There are several kinds of mean in mathematics, especially in statistics. Each mean serves to summarize a given group of data, often to better understand the overall value ( magnitude and sign) of a given data set.
For a data set, the '' ar ...
.
See also
*
List of valuation topics
*
Price discovery
*
Valuation using multiples
*
Valuation using discounted cash flows
*
Valuation using the Market Penetration Model
External links
stock image and behavioral finance
Stock market
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