What is any particular common stock worth?
Price is not value, pricing is not valuation, and pricing models are not valuation models. Pricing models depend on historical market prices. Valuation models are independent of market prices and markets. The conventional academic capital asset pricing model has one factor, the market beta coefficient. Models that include market beta are pricing models, not valuation models. This is not merely a matter of semantics. The difference between price and value is the raison d’tre of investment valuation independent of market pricing. Technically speaking, pricing models are statistical or econometric stochastic models that return group-average estimates of efficient market price. In contrast, valuation models, whether discounted cash flow (DCF) net present value (NPV) or the equivalent economic value added (EVA), are appraisal-type models that return unique estimates of fair or intrinsic value. A valuation model that uses Monte Carlo simulation returns stochastic or probabilistic range-and-m
