What is Priced Out?

'Priced out' refers to something being too expensive. Alternatively, priced out refers to the adjustment in a security's market price in response to new information.

How Does Priced Out Work?

For example, a person earning $35,000 per year might be priced out of the Manhattan housing market. Alternatively, when S&P downgraded U.S. Treasuries, stocks priced out in new information by the following week.

Why Does Priced Out Matter?

Being unable to afford some things is an economic fact of life for practically everyone. From a business perspective, however, pricing certain sectors of the population out of a market for a good or service can significantly reduce sales and profits even if doing so also lends an air of exclusivity. Additionally, consumers who are priced out of one market (Manhattan, for example) may look for and thus create a market for substitutions that are less expensive.

In the trading world, the speed at which securities price out new information is a reflection of market efficiency. That is, the sooner and more completely a stock price reflects all known and knowable information (i.e., the faster it prices out), the more efficient and thus the more liquid the market becomes. In many cases, stocks price out based on news and events that have already happened, but also news and events that simply might happen (e.g., tax increases, likely regulatory changes, or expectations about competitors).

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Paul Tracy
Paul Tracy

Paul has been a respected figure in the financial markets for more than two decades. Prior to starting InvestingAnswers, Paul founded and managed one of the most influential investment research firms in America, with more than 3 million monthly readers.

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