[HSO]

This is a very naive (or doctrinaire) view. Please read one of the canonical value investing books, or Cunningham's book of excerpts from Berkshire Hathaway's annual letters by the chairman. For a more scientifically minded angle to this topic, please see Didier Sornette's "Why stock markets crash" (PUP 2003). Price and value are two different things, at least in my representation of the world...

[jbm]

I can't comprehend why this was modded down. The book is fascinating and provides us with an insight into valuation. It really is a topic that is difficult to sum up in any reasonable time. I wish I could find a free source for it, but I found the google preview.

http://books.google.ca/books?id=F3WpzcinFc4C&dq=Didier+S...

Please go easier on the thumbs down stuff.

[HSO]

Thanks. You guys might want to check this here: http://arxiv.org/abs/cond-mat/0301543