What Price Shares?

Abstract

To the author’s knowledge no work has been done which attempts to provide an estimate of the intrinsic worth of shares in general. This is both surprising and worrying given the obvious importance of investment in shares by many of the major financial institutions. For example, if over the years hundreds of millions of pounds had been invested in a group of assets whose values were in a fundamental sense too high then at some indeterminate time in the future this would be finally reflected in the market value of shares with disastrous consequences. The exploratory work described in this paper only enables a range to be put on the likely real worth of shares in the first quarter of 1974, and not surprisingly it is a fairly wide range. Nevertheless it does provide some order of magnitude of the underlying worth of shares. First the theoretical background to the approach used is considered.