What Is the Market Approach? The market approach is a method of determining the value of an asset based on the selling price of similar assets. It is one of three popular valuation methods, along with the cost approach and discounted cash-flow analysis (DCF). Regardless of the type of asset being valued, the market approach
What Is a Market Average? A market average is an indexed measure of the overall price level of a given market, as defined by a specified group of stocks or other securities. A market average computes the sum of all current values of assets in the group and then divides that by the total number
What Is the Stock Market Capitalization-to-GDP Ratio? The stock market capitalization-to-GDP ratio is a ratio used to determine whether an overall market is undervalued or overvalued compared to a historical average. The ratio can be used to focus on specific markets, such as the U.S. market, or it can be applied to the global market, depending
What Is Market Capitalization? Market capitalization refers to the total dollar market value of a company’s outstanding shares of stock. The investment community uses this figure to determine a company’s size instead of sales or total asset figures. In an acquisition, the market cap is used to determine whether a takeover candidate represents a good
What Is the Market Capitalization Rule? The market capitalization rule is a rule set by the New York Stock Exchange (NYSE) to determine a minimum market value for a company to continue to be listed on the exchange. The market capitalization rule states that companies must maintain a minimum market cap of $15 million over
What Is a Market Challenger? A market challenger is a firm that has a market share below that of the market leader, but enough of a presence that it can exert upward pressure in its effort to gain more control. Market challengers are able to jockey for industry leadership in several ways: Challenging the market
What Is Market Depth? Market depth refers to a market’s ability to absorb relatively large market orders without significantly impacting the price of the security. Market depth considers the overall level and breadth of open orders, bids, and offers, and usually refers to trading within an individual security. Typically, the more buy and sell orders that
What Is a Market Discount? A market discount is the difference between an asset’s stated redemption price and its lower price in the secondary market. For a fixed-income security, a market discount would exist if it trades below par value. Market discounts arise when the asset’s value on the secondary market decreases after it has
What Is a Market Disruption? A market disruption is a situation wherein markets cease to function in a regular manner, typically characterized by rapid and large market declines. Market disruptions can result from both physical threats to the stock exchange or unusual trading (as in a crash). In either case, the disruption creates widespread panic
What Are Market Dynamics? Market dynamics are forces that will impact prices and the behaviors of producers and consumers. In a market, these forces create pricing signals which result from the fluctuation of supply and demand for a given product or service. Market dynamics can impact any industry or government policy. There are dynamic market
