Should we abandon fair value calculations? P…

Yesterday, I talked about how thinking about markets in analogy to thermodynamics leads us to the conclusion that if we take the Second Law of Thermodynamics seriously, share prices should almost never be at or near fair value. Similarly, a market index like the S&P 500 should almost never trade at fair value because it is incredibly unlikely that the valuation of each stock in the market is aligned in such a way that individual mispricings cancel each other out.

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