A type of security which grants buyers access to income-cashflows in a common economic enterprise.

Stocks are valued by the market as a combination of three factors which inform price formation:

  1. Discounted future cash flows
  2. Momentum
  3. Public sentiment

Stocks return income-cashflows generated by the enterprise to shareholders via three processes:

  1. Dividend payments
  2. Stock buybacks
  3. Mergers and Acquisitions


  1. Fama, Eugene F. "Efficient capital markets: A review of theory and empirical work." The journal of Finance 25, no. 2 (1970): 383-417.
  2. Janeway, William H. Doing capitalism in the innovation economy: Markets, speculation and the state. Cambridge University Press, 2012.
  3. Lefevre, Edwin. 2004. Reminiscences of a Stock Operator. Vol. 175. John Wiley & Sons.