Question

What is the value of a security? What is the price of a security? How are security value and price linked with each other?

Answer 1

The value of a security is often estimated by analysts using the information on the stocks earnings, market share, the volume of sales, the competitors in the industry and the review of reports prepared by the analysts. After the use of different valuation measures  and these information the analysts reach at a specific value, the stock should trade in the market.

The price of a security is the market price , the price at which it trades on the exchange and the transactions are carried out between the buyers and sellers and the price that the investors are actually paying to buy the stock.

The security price and value are related as often the stock price is very close to the value . Due to fluctuations sometimes the stock price might deviate.It is the estimate of value that guides the buyers and sellers toward purchasing or selling a stock.