• We are pleased to announce that the winner of our Feedback Prize Draw for the Winter 2024-25 session and winning £150 of gift vouchers is Zhao Liang Tay. Congratulations to Zhao Liang. If you fancy winning £150 worth of gift vouchers (from a major UK store) for the Summer 2025 exam sitting for just a few minutes of your time throughout the session, please see our website at https://www.acted.co.uk/further-info.html?pat=feedback#feedback-prize for more information on how you can make sure your name is included in the draw at the end of the session.
  • Please be advised that the SP1, SP5 and SP7 X1 deadline is the 14th July and not the 17th June as first stated. Please accept out apologies for any confusion caused.

Market values

G

Gabriella Knipe

Member
Hi

I have a question regarding the notes on the disadvantages of using market values to value investments.
What does the following statement mean:
market value reflects the position of the marginal investor rather than the individual (e.g. taxation)

Kind regards
 
Hi - good question!

The current market value of a stock will reflect the perceived value of that stock to those who are currently trading it, based on their own circumstances and beliefs. The 'marginal investor' is a notional representation of those current traders.

So, for example, if another investor has a different taxation position than that of the marginal investor, they might place quite a different perceived value on the stock. If that stock has tax advantages to them, but not to the marginal investor, they would believe it to have a higher value than is represented by the current trading (ie 'market') value (and vice versa).

Hope that helps.
 
You must log in or register to reply here.
Back
Top