Stock Market Indexes and Fair Value Indications
Indexes and their relationship to "fair value" give investors a hint on how the market will open. The relationship between a market index and its futures contract is referred to the mentioned above fair value.
Depending on a comparison between the futures and the fair value, traders make predictions about how the market will open. For instance, if the futures are higher than the fair value, the market will open at a higher level than the previous trading day. On the other hand, if the futures are lower than the fair value, the market will open at a lower level than the one from the previous trading day.
In order to make more accurate predictions the relationship should be examined as close to the opening of the market as possible since the values change over the night. Information can be obtained from the various online sources, or from the media, which reports the values before the opening of the market.
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