What is Market Value?

Welcome to the Investors Trading Academy talking glossary of financial terms and events.
Our word of the day is “Market Value”
Market value is a subjective estimate of what a willing buyer would pay a willing seller for a given asset, assuming both have a reasonable knowledge of the asset's worth. Market value is important in both law and accounting. In the former, it is often used in assessing damages as the result of a lawsuit. In the latter, determining the market value of an asset is important to determining the amount of tax owed on it. Value investors look for companies with market values below their book values, believing these companies to be undervalued.
It is also the highest estimated price that a buyer would pay and a seller would accept for an item in an open and competitive market.
Market value is a concept distinct from market price, which is “the price at which one can transact”, while market value is “the true underlying value” according to theoretical standards. The concept is most commonly invoked in inefficient markets or disequilibrium situations where prevailing market prices are not reflective of true underlying market value. For equal, the market must be informationally efficient and rational expectations must prevail.
Investors should realize that Market Value is not exact science, but an introduced concept from individuals and companies as a business tool. Value is subject to seller and buyer's perception and interpretation of parameters that they decide to take into consideration, while other people usually refer to their very own perceptions and interpretations of what those people think is important.

By Barry Norman, Investors Trading Academy

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When estimating market value will the physical, financial, intangible, and human assets be estimated into their number?