Identification

• A stock's individual share price equals its market value for one share of stock. By auction format. Individual stocks trade at market values, where the highest bidding and lowest offering prices meet. For information, you monitor the stock ticker to observe real-time share prices and changes in value over the prior session. Financial media conglomerates, such as CNBC and Bloomberg, stream the stock ticker for their viewers throughout the day.
  
  

Features

• Market capitalization, or market cap, defines the market valuation for an entire corporation. To calculate market cap, you multiply a stock's current share price times the underlying corporation's total number of common shares outstanding. The corporation documents common shares outstanding within the balance sheet section of its annual report.
  
  Market capitalization is an especially important statistic for corporate takeovers. Theoretically, an outside party may control an entire corporation after buying more than 50 percent its outstanding common stock -- because one share equals one vote. From there, the acquirer can use market capitalization as a basis to make an offer to buy the corporation, outright.
  
  

Considerations

• Shares of stock represent ownership stakes within corporations. As such, stock market valuations fluctuate with business profitability projections. For example, shares of a technology firm should move higher -- on reports of strong sales for a recent software release. Alternatively, integrated oil company stocks, such as Exxon and Chevron, would lose market value amid weakening oil prices. In general, stock market valuations overall track the economic cycle of growth, recession and recovery. You can expect stocks to make money when the economy is strong -- as indicated by low unemployment rates and a stable housing market.
  
  

Warning

• Stock market valuations are not guaranteed. At worst, you can lose your entire investment amid corporate bankruptcy. Share prices are difficult to predict over short-term time frames of less than six months. Short-term volatility is due to the nearly infinite amount of factors that influence corporate profits and stock market valuations. These factors include prevailing interest rates, Federal tax policy and the foreign exchange market. High interest rates and taxes increase the costs of doing business for corporations. Meanwhile, a strong dollar adversely affects the export economy -- because U.S. goods are now more expensive for foreign buyers.
  
  

Strategy

• The Securities and Exchange Commission recommends investment diversification as means to manage the risks of fluctuating stock market valuations, while also allowing for growth. Within the stock market, you can buy shares of companies from different industries and geographic regions. As a smaller investor you may choose to diversify yourself with a group of domestic and international stock equity mutual funds. Further, you may also add bonds and Certificates of Deposit (CDs) to your portfolio to collect interest income and preserve wealth amid recession.