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Definition of 'Discounting Mechanism'
The premise that the stock market essentially discounts, or takes into consideration, all available information and present and potential future events. When unexpected developments occur, the market discounts this new information very rapidly. The Efficient Market Hypothesis (EMH) is based on the hypothesis that the stock market is a very efficient discounting mechanism.
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Investopedia explains 'Discounting Mechanism'
The fact that the stock market is essentially a discounting mechanism explains the wild swings in stock indexes following unexpected events such as a natural disaster or a terrorist attack, or an earnings miss in the case of an individual stock. The efficiency of the stock market as a discounting mechanism has been vigorously debated over the years. Economist Paul Samuelson, attempting to show that equity markets do not always get it right, famously remarked in 1966 that "Wall Street indexes predicted nine out of the last five recessions."
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Search results for 'Discounting Mechanism'
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http://stocks.investopedia.com/stock-analysis/2010/ABB-Is-Better-Than-You-Think-ABB-AEP-SO-SI-EMR0726.aspx
... We all know that the stock market is a discounting mechanism; what happened yesterday
is only important if it changes the views about how tomorrow is going to ...
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http://financialedge.investopedia.com/financial-edge/0811/5-Industries-Looking-Strong-In-The-Summer.aspx
... the dichotomy between fundamentals and stock market performance, it is easy to remember
the adage that Wall Street is a forward-looking discounting mechanism. ...
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http://stocks.investopedia.com/stock-analysis/2011/Paychex-Puts-A-Damper-On-Economic-Enthusiasm-PAYX-ADP-NSP-ECL-CTAS-GWW-LECO0328.aspx
... the curve with this recovery. It is true that the market is often a
forward-looking discounting mechanism. That does not mean that ...
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http://www.investopedia.com/articles/fundamental-analysis/11/understanding-liability-adjusted-cash-flow-yield.asp
... for years that were truly aberrant relative to the trend, but should be aware that
tinkering too much can reduce the built-in discounting mechanism of that 10 ...
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