A commonplace in Finance I is the “time value of money”- the idea that future worth may be discounted to the present moment. But looking at the oscillation of stocks over a given time-period, spanning a universe of daily volatility unknowable in any discrete “present”, it makes you wonder about an equity’s present “value”.

What is less enigmatic— or at least more pragmatic— is to think about the immediately present cost of a share to mirror that moment’s market of buyers and sellers; and to consider that at each moment, that market is constructed in large part as a function of buyers’ and sellers’ future expectations.

Because expectations derive from emotion, present equity value suggests a present assessment of market participants’ conjectures about future expectations (across all participants’ future-oriented timelines): so that value, despite our desire to link it to fundamental or technical metrics, is always a time value of emotion.

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Equities and the Time Value of Emotion

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