How does stock prices go up




















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The information on this site does not modify any insurance policy terms in any way. Stock prices can move around a lot. Software giant Microsoft, a widely followed and fairly well understood company, recently hit a week high that was about 37 percent above its week low.

Legendary Wall Street analyst and mentor to Warren Buffett , Benjamin Graham, once said that in the short run the market is a voting machine, and in the long run it is a weighing machine. That means that over short periods of time — a day, a month or even a year — stock prices can move for just about any reason at all. You are here Home. What causes a stock's price to change? Ask an Economist. Stock Market Question. Macroeconomics and Monetary Economics.

Of course, it's not just earnings that can change the sentiment towards a stock which, in turn, changes its price. It would be a rather simple world if this were the case! During the dot-com bubble, for example, dozens of Internet companies rose to have market capitalizations in the billions of dollars without ever making even the smallest profit.

As we all know, these valuations did not hold, and most all Internet companies saw their values shrink to a fraction of their highs. Still, the fact that prices did move that much demonstrates that there are factors other than current earnings that influence stocks. Investors have developed literally hundreds of these variables, ratios and indicators. So, why do stock prices change? The best answer is that nobody really knows for sure. Some believe that it isn't possible to predict how stocks will change in price while others think that by drawing charts and looking at past price movements, you can determine when to buy and sell.

The only thing we do know as a certainty is that stocks are volatile and can change in price extremely rapidly. The important things to grasp about this subject are the following: At the most fundamental level, supply and demand in the market determine stock price.

Price times the number of shares outstanding market capitalization is the value of a company. Comparing just the share price of two companies is meaningless.



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