1How does stock prices move?

  • The market makers have new information and reaches a new consensus?
  • Someone is throwing a huge amount of money?

2No-arbitrage constraint for stock prices

Valuation: no-arbitrage principle for stocks, liquidation value, plus the time-discounted dividends

The market capitalization of a firm should not fall below its liquidation value, because otherwise someone with enough money can buy enough shares and liquidate the firm for a risk-free profit.