Everyone knows that the price of share changes every time. The price of share changes due to forces of demand and supply. Interpreting demand and supply is easy but it is difficult to analyze what makes people like a particular stock and dislike another stock and it brings down in figuring out what news is good for company and what news is not. Let us see some vital factors that affect share prices:
Performance of company is one of the most important factors. Companies produce financial reports twice a year. The figures and values give gives insight to company’s performance. The next one is the wider environment, if economy of the company is good and is expected to continue in that ways then the investors feel confident and companies as well tend to perform well and deliver strong profit and as a result demand for shares tends to raise price and increase and vice-versa.
Another various reasons for fluctuation in price are fundamental factors which is a combination of earning per share and valuation multiple, most of the companies are measured on the basis of dividend per share which represents the amount that shareholders actually receive. Technical factors like inflation which has strong relation with the valuations and deflation signifies loss in pricing power of company and is bad for stocks. Share price affected is also affected by the liquidity of the firm; it shows how much interest an investor has on a specific stock. The companies with high liquidity are responsive to material news. Historical share prices data are also the means to predict the market fluctuation.
Hypothetically, earnings are what affect investors’ assessment of a company but investors use other indications to predict fluctuation in share price. Ultimately, it is investors’ attitude and sentiment that affects the price of shares. There are many theories that try to explain the change in stock prices but unfortunately, no theories have been discovered that can explain everything.