Why do stock prices change so much? If this answer was simple basics of stock market, everybody could have timed the market to a T .Mr. Market causes price to vary erratically. There are several reasons which causes the price to fluctuate like this. during this article we’ll see why stock prices fluctuate sort of a boat in the rough sea.
When investors are buying more stocks (high demand) its price will go up basics of stock market . When investors are selling more stocks (high supply) its price will fall. The same logic applies to any item within the market. But stocks are special, why? It is difficult to seek out a legitimate reason why people are buying or selling a stock. This happens because the market is heavily driven by emotions than by logic.
When emotion rules, we will find less valid reasons which will explain why the basics of stock market changes such a lot . Logical investing available market will ensure the predictability of the market. The most common reason that triggers buying or selling of stocks is news associated with the company. Investors must decipher between good and bad news. Good news triggers stock buying. Bad news triggers stock selling.
The problem is that there are no set rules to differentiate excellent news from bad news basics of stock market . The information beginning in the market about the company/economy is complex. In this world there are as many stocks as there are investors. Individual investors have their own set of philosophies of shopping for and selling of stocks. There is no news more reliable about the company than its financial statements.
Listed companies are obliged to announce/publish their financial performance every quarter/year basics of stock market . The information appearing in financial statements can trigger the buying and selling of stocks. Why do stock prices change such a lot when the company reports higher profits? One financial parameter that influences stock prices most is earning per share (EPS).
Higher profit generally means higher EPS basics of stock market . The market price of stocks follow the proportionate growth in EPS grows. Similarly when EPS of stocks falls, the market value of stock also will fall.