Investing term
What is Price discovery?
The process by which the market figures out what a stock is currently worth.
Price discovery is the ongoing process by which a market figures out what a security is worth, as countless buyers and sellers act on information and push the price up or down. It's why active, liquid markets are valuable — they aggregate everyone's knowledge into a single, constantly updating price. Big news triggers rapid price discovery as the market re-prices in real time.
For example
An earnings surprise sends traders scrambling to buy and sell until a new price settles — price discovery hammering out the stock's updated value.
Price discovery is taught hands-on in Stage 5 — How Markets Work Globally.
See the lesson →