The Truth About Stock Prices
In the last few weeks, I’ve unpacked studies addressing both the nominal price illusion and the nominal price premium. So today I’ll answer a related question: Do nominal stock prices really matter?
Because the level of a company’s stock price is arbitrary—it can be manipulated, for example, by firms via adjustments in the number of shares outstanding—if markets were fully efficient, nominal stock prices should be randomly chosen by firms. However, until just recently, the average nominal price of U.S. stocks had remained around $30 over the last several decades.
Read the rest of the article on ETF.com.
