Define Market Grading

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I'll keep it simple.

In my mind market grading is when a coin is graded differently then other coins of the same series because of it's perceived rarity or because that particular coin is in demand.

 

I doubt this helps much, but here is PCGS's definition:

 

Market grading takes a number of things into account; luster, strike, eye appeal, contact marks (number, size and location) and the value of the coin. Also the standards are different from series to series (For instance Bust dollars aren't going to be held to the same standards as Morgan dollars). Unlike with technical grading, luster, strike, and eye appeal can affect the grade (in both directions; higher or lower).

The most controversial part of market grading is value, coins that are rare or highly valuable tend to have their own standards, separate from lesser valuable coins from the same series (Like Matt said). The standards are lessened or weakened when it comes to grading these coins. This is why you often hear phrases like "key date bump" or "CC bump", it's because the market wants and accepts these coins to be graded on lesser standards.

 

hmmm, this should be a fun discussion...

Market Grading (according to Noodle): The grade assigned to a coin based on it's technical grade along with market factors such as but not limited to: rarity and value in the marketplace.

Market graded coins cannot be graded across series, as factors other than strike and luster are used to determine grade. Many people see market grading as a practice that tends to be more lenient on higher value coins and I would agree.

My main problem with market grading is that I don't think value should have any influence on grade. Grade is grade, value is value and TPGs value coins more than they actually grade them. <-------------- editorial comment - opinion

 

On the other hand, Early American Copper (EAC) http://www.eacs.org/ grading is not market based. The initial step is to estimate it's sharpness. I like to use the ANA grading standards for my first pass.
The next step is to factor in what problems that the coin might have (surface roughness, rim bumps, scratches, etc.) and determine a net grade. An EAC grade can be one or two grades lower than what a reputable TPG assigns. Only then you should consider pricing.

 

Similar to stocks, you can estimate the fair value of a stock by many factors, but market grading is what a share will sell for in the open market.

Market grading in coins aligns a grade given by someone ( TPG, individual) to what the coin would fairly bring in the market. Unlike the stock market, the price of such exchange is not instantly known to all so there is a lot of hysteresis and sometimes hysteria in the changing. Basically I think, as the FMV of a coin goes up, the grading standards are decreased, and visa versa. Since in 20 years, the average FMV of a coin has increased significantly, we feel the standards were much stronger then than now.

" Lord give me a dealer who still grades by the early edition of Brown and Dunn!"

 

His store is about 15miles SW of me. I am sure he can grade them any way you like. His name is Jerry Brown. Yes, he is the other Brown's son.

 

Technical Grading speaks to the numerical grade based on a written standard.

Market Grading speaks to the value or relative ranking of a coin.

 

Yes and it's subjects like this that make me glad I'm a lousy, horrible, no ability grader of coins. For me I could really care less if a coin is MS-60 or MS-101.397. How many points to a grade such as all those MS's is really beyond me. I seriously have no idea of what is ment by market grading and even if it was explained, I'd go out of my way to forget the details.
Sorry, but I'm still in the old G, F, Unc and Proof era in the old, really OLD standards for coins. And even back then never really sure.
I place all my coins in Albums and by the best ones in the first Album followed by coins that don't look quite as good in the next one. By (good) I don't mean the G-4, -5, etc stuff. I just mean not as nice or less than the other ones.
I have read many things about grading and really try to forget them.
It really pays to be old sometimes. Fantastic excuses to tell people I forgot all about grading coins. :goofer:

 

"Market grading" is grading based on perceived value in the marketplace, rather than on technical merits.

For example, many Capped Bust Half Dollars as well as Draped Bust coins of different denominations, which are technically AU, are graded unc. And that's largely because they are worth unc. money, even as high grade AU examples. Also, many coins with great color get a grade bump up because the color makes them worth more (like a higher grade one), even if their technical merits alone, dont.

 

Jerry Bobbe recently put it quite simply, grade = price.

 

To me market grading is a technical grade impacted by market influence.

 

Kind of like a the bump up in grade CC Morgans get from the TPG's. I have read that the TPG's also show leniency for "celebrity" coins as well. Market grading is the grade offered by dealers for raw coins. ANA standards apply.

 

Remembering that the grading system was invented to apply a value to a coin.

When values are up, the TPG's grades go up. Money is flowing, people are happy about paying higher prices...as long as the coins they are paying dearly for are a higher grade goofer. It's a way to keep money flowing.

When the coin market slumps, the TPG's tighten standards to once again bring the grade in line with current values, which means a lower grade than before for the same coin. So at this point, folks are left holding slabs that are over-graded.

 

That's why I like EAC grading for early coppers. The grade is determined before market influences. I've yet to see an EAC grade higher than a TPG grade.

 

I would guess that Mark's definition is probably pretty close. I suspect that market grading started out with people making minor adjustments to known technical standards. In other words, PCGS or NGC knew that a particular coin was a technical MS64 but graded it an MS65 based on market forces (condition rarity, demand, whatever). The unintended result may have been that market grading started out as the exception and, over time, morphed into the standard, leaving the technical standard behind.

By the way, the PCGS definition sounds tautological: "A numerical grade that matches the grade at which a particular coin generally is traded in the marketplace." But it is PCGS that is assigning the numerical grade to the coin so of course that's the grade at which the coin is traded in the marketplace.

 

A crude (by today's standards) grading system predated Sheldon's 1949 assignment of numerical values to commonly accepted descriptive (adjectival) grades. Sheldon derived the numbers based on relative pricing of 1793 - 1814 large copper cents. At that time, there was a linear relationship between Sheldon's assigned numerical grade and price. By determining the relative pricing and descriptive grades, Sheldon determined that a "good" condition coin had a relative price of 4, VG was 8, ..., almost uncirculated (AU) was 50 and uncirculated coins ranged from 60 to the ideal perfect coin being 70.

I should point out that the pricing relationship between grades is no longer linear, but exponential. I've submitted an article to The Numismatist detailing the relationship between pricing and grades. I'll let the list know if it gets accepted.

 

Technical grading accounts for only the surface preservation of the coin including level of wear for circulated examples. Market grading which is employed by all of the TPG's incorporates the other elements of grading including luster, strike, and eye appeal. These other elements allow for two different coins with the same surface preservation to be graded differently. The coin with more eye appeal and better luster can have a higher grade because the all of the factors sought after in the market place have been applied.

Within market grading exists the practice of value grading. An example would be grading an AU coin MS because that is how the coin is valued in the market. Grade bumps for toning would fall into this category as well.

 

ok, Doug...

let's hear where we have it wrong.

Define Market Grading for us, I am dying to hear!