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On Charlie Rose this week, Felix Salmon made a good point about market volatility:

It is impossible to know the value of a company like Apple or Goldman Sachs to within a half a percent either way. But that's what you wind up doing when you look at the stock price. You say, "Oh it went up a percent! Or down a percent!" That is pure noise in the distribution of roughly, more or less, where we think [the price] should be.

How true. And this is something that private companies handle better than public companies.

When a private company wants to know how much it is worth, management hires an investment bank, or a valuation consultant, which provides a "fairness opinion."

Analysts look at the company's financial statements, do some wizardry in Excel, and come up with a reasonable estimate for what the company is worth.

But when an investment bank presents a private business owner with a fairness opinion, you will almost never see this:

We think your company is worth $18.16 per share.

Instead, you'll almost always see something like this:

We think your company is worth between $17 and $19 per share.

Valuations are given in a range, not an exact value.

There's a good reason for this.

All valuation estimates are just that -- estimates. They're an attempt to predict a future that, in reality, cannot be known.

To value a company, I have to know what future interest rates will be, for example. But I don't. And I can't.

I can, however, come up with a reasonable range of possibilities.

I can't look at you with a straight face and say 10-year Treasuries will yield 4.21% in January 2017. But if I said there's a good chance 10-year Treasuries will yield somewhere between 3% and 5% in January 2017, that's more realistic. (The range could still be off, but it has a better chance of being more or less right.)

Same goes with earnings growth, capital spending, cost of goods sold, and dozens of other variables. The future is thought of in a range of probabilistic outcomes, so current valuations are presented in a range, too.

But the stock market doesn't.

As I write, I can see Apple is worth $116.45 a share. There's no range of possibilities -- not "between $100 and $125 a share." The exact value, right now, is $116.45. That's what the market estimates Apple's future cash flows are worth, discounted back to today.

But not even the market, which aggregates millions of opinions into a single price, can know exactly what the future holds. We can only make reasonable estimates about a range of outcomes.

The reality is that, even if Apple (just to use an example) is priced at $116.45 a share, there's a range of prices that would be reasonable to pay.

It might be reasonable to pay $110 a share, or $120. Either probably makes sense given the range of potential future outcomes.

Thinking of values this way should change how you react to short-term volatility.

When a stock goes up or down, even by a few percentage points, there's a tendency to think the market is trying to tell you something. That it's signaling your company is worth less, or more, than it was a day ago, or a few weeks ago.

But that's rarely the case.

The majority of stock movements are just random wobbles within a reasonable valuation range. Apple shares falling from $116 to $112 might not mean anything at all. It might just mean that shares are probably worth something between $110 and $120, and anything within that range means more or less the same thing.

"But nobody thinks about markets that way," Salmon said. "Although they should."

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Morgan Housel has no position in any stocks mentioned. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple and JPMorgan Chase. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.