The term "market value" can be used to describe a couple of different scenarios. The true meaning of the phrase depends on the context in which it is being used, but it is generally used to describe situations in the investment of stocks and bonds, debt and real estate.
Investment of Stocks and Bonds
When market value is used in the financial world of stocks and bonds, it is the current price of a stock or bond. This is the price that is given to potential investors to buy the stock or bond. It is also the price told to sellers who wish to sell the stock or bonds. Market value may also be referred to as the market price when talking about stocks and bonds.
Market value may also be used when talking about debt. In this scenario, the term is used to describe the market capitalization plus the market value of debt. This may also be referred to as the total market value of the debt instrument.
Compared to Book Value
Some investors in stocks and bonds confuse the term market value with book value. These terms, however, can be different. The difference lies with the fact that the market value of a stock or bonds takes the future growth potential of the stock or bond into consideration.
In the real estate industry, the term market value is also a common conversation point. In this context, the market value of the property is how much it is worth at the present time. The market value is typically used to set selling and buying prices for pieces of real estate. In order to determine the current market value, property appraisals are usually done on the property.
Changes in Market Value
One factor that affects the market value of any good or service is the simple rule of supply and demand. The more in demand a product or service is (including stocks, bonds and real estate) the higher its price or market value. The more of a supply a good or service has the less its market value or price.