When stock prices reflect fundamental values:

Question

Quizplus · Accepted Answer

When stock prices reflect fundamental values, it means that the stock prices accurately reflect the underlying business performance of the companies whose shares are being traded. This leads to a more efficient allocation of resources, as investors are more likely to invest in companies that have solid fundamentals and promising growth prospects. This in turn can lead to a healthier and more stable economy. However, this does not necessarily mean that all investors will have positive returns or that companies will have an easier time obtaining financing, as their individual performance may still vary. Similarly, it does not necessarily mean that the overall level of the stock market will move higher, as market trends may be affected by external factors such as global economic conditions, political developments, or market speculation.

When Stock Prices Reflect Fundamental Values