the price people are prepared to pay for a piece of a company tells you how much money they think that company will make in the future. In effect, stock markets hold hourly referendums on the companies whose shares are traded there: on the quality of their management, on the appeal of their products, on the prospects of their principal markets.
The value investors assign to a company's shares reflects their expectations about its future profitability. This indicates that when investors decide how much they are willing to pay for a share, they are effectively voting on the company's potential success. Their assessments take into account various factors, including management quality, product attractiveness, and market opportunities.
Niall Ferguson, in "The Ascent of Money," suggests that stock markets function like continuous polls that gauge public opinion about a company's viability. Each transaction represents an evaluation not just of current performance, but also of future opportunities, making the stock market a dynamic reflection of economic sentiment.
