Rob Schaap wrote: >What's this 'fair value' stock exchange pre-opening reports are always on >about.
It's an estimate of where the futures should be trading, given time to maturity and the gap between dividend yields and prevailing interest rates. It's rather like the Black & Scholes options valuation model. When market values are above fair value, it suggests a strong opening - though operating against that is the fact that arbs can sell the futures and buy the stock, hoping to reverse the position when values return to more normal levels. Doug
