Factors Affecting Stock Prices

Many of us are share market enthusiasts. We keep investing in stocks every now and then and trade with them. We believe to go by our intuitive thoughts and also speculation skills. But at times we have to face certain risks and loss due to the same. This is how a share market treats its members with a lot of surprises. But we need to have the deeper understanding of the factors that cause such fluctuations in stock prices.

Some of the many are discussed here:

  1. Demand for the share:

When there is more supply than the demand for a share it will sell low. The demand for a share is determined by many factors which are related from the profits from it. When the expected return from a share is more than such type of a share will attract more investors.

  1. Bank interest rates:

Banks offer a low rate of interest on borrowing when there is a low bank rate by banking regulation. This helps customers to get a chance to borrow a larger sum of money and invest in securities. Thus the price of securities increases on such shares.

  1. Underwriting:

When a person guarantees the minimum purchase of shares of the company and this is not fulfilled he may have to purchase it completely. But to create a better demand these people called underwriters buy the shares through agents which will create an artificial demand for the shares thereby causing fluctuation in the prices.

  1. The buying behavior of institutional investors:

Some institutions which decide to invest in stocks have a different attitude towards a share and its buying decision. The people also thereby go by their decision and hence invest in similar shares.

  1. The financial position of the company:

The crucial factor to judge a company’s share is the financial position. This justifies the payment of dividend to shareholders when the financial status is good. Therefore people prefer the companies which are financially well off.

  1. Appointing and the resignation of people in a company:

When the top-level management change or are newly appointed, fear and doubt are created in the minds of people which are risky and changes the share price accordingly.

  1. Listing of the shares in more than one market:

This affects the share prices as the changes in one market will affect the prices in another market simultaneously.there too many listings can be risky and dangerous.

  1. Political changes:

Share market is very sensitive to political change and hence during war outbursts and other political instability issues, the price of shares varies to a large extent.

These areas few of the reasons why the share market prices fluctuate.