What Causes The Unpredictable Changes of Stock Prices
Day to day we observe the stock prices altering. But what really are the main causes behind these unstable changes of price movement? Stock prices easily change because of the market energy and forces. To make it very simple, this can be explained by the law of supply and demand. In the event that there are more people who choose to buy a product or stock rather than to sell it, the result will be the price of the stock will increase. On the other hand, if the people would prefer more to sell the products rather than to buy them, the effect would be an more increased supply than demand, and eventually the stock price will fall.
However, I see it is better for us to understand first the definition of the term price before we know identify those reasons behind the movements of stock prices. Most of the theories of financial books define the term stock price as the current value of all expected earnings of the company, which is then divided by its present shares. In other words, this means that the definition of the price is dependent with the earning competency of the certain company. Commonly, companies obtain serious values out of a simple investment in estates since the ability for those estates to earn money is important to the company. Moreover, companies that are not earning so much today can still have a great share price because the stock price is entirely based on the future income of the company. No other business is ever established only to throw money, but expectedly to earn as much income as possible. Therefore, the earning that the company will have in the future, and the time he expects to achieve the growth of the company are the factors that would determine the stock of price of the company.
Logically saying, when a person buys or avails the shares of a company, they effectively say that they believe that the shares of that company are depreciated. On the other hand, by selling the shares, they believe that the stocks are overestimated and it is expected that the stocks would decrease in the future.
You can find below the major causes of the movements of the stocks prices in the market.
The first on the list is the information regarding the stock. As this new information spreads to the public, the market will alter the price either up or down depending on how the market sees the information will disturb the future income of the company.
Another cause of this alteration is the study of human minds since through this, it makes new opportunities for more investors to come in.
The last factor may be is the analysis of the supply and demand which gives opportunities to investors who are waiting to see the balance to come.