The deviation of stock prices from their intrinsic values makes the investors to take a quick advantage of this mispricing. The mispricing occurs either by buying the undervalued stocks or selling the overvalued stocks.
Thus the investor's takes decisions that drive to their new constancy level, according to the information of change in prices.
In case if some of the investors have irrational views, they hold the losers too long and sell the winners too quickly. Thus, a practical market will have irrational investors also.
If the market itself is not consistent the mispricing continues for a relatively longer period. Then the investors who are consistent will be losing higher amounts.
So, while investing in the market it is better to assume the intrinsic value is approximately equal to the market price of the stock. But periodically major changes may occur, which drives the stock price move up or down.
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