Why Do Stock Prices Fluctuate?

The stock market is essentially a giant auction. Theresults prove to be below expectations, the price
only difference lies in the fact that instead of fancygraph witnesses a downslide.
objects, ownership in businesses is up for sale.Apart from growing sales and profits, there could be
Stocks are traded that is bought and sold by tradersseveral other factors that could make the stocks go
at places called Exchanges. Stock prices changeup in price. These factors include a new enterprising
every day, in fact sometimes by the hour! As apresident at the helm of affairs, the introduction of
result of this, the market can appear to fluctuatean exciting new product or service, acquisition of a
widely. Generally, the price of a stock is influenced bymassive new contract, motivating reviews of a new
the basic rule of economics, which is illustrated byproduct in the press or on television, the decision to
supply and demand. Understanding the intricacies ofsplit stock, a scientific discovery that implies an
supply and demand is not a very complicated task.additional utility of the product, a famous investor
The supply and demand rule means that if morebuying shares, in general lots of people buying shares,
people want to buy a stock than sell it, the pricean analyst rating the shares from 'buy' to 'strong
increases because those shares are rarer and peoplebuy', global expansion of the company, a competitor's
will pay a higher price for them. In such cases, thefactory burning down and the company winning a
demand is more than supply. Conversely, if morelawsuit.
people wanted to sell a stock and no one isOn the other hand apart from profits slipping, stocks
interested in buying them, there would be greatercould go down due to variables such as resignation of
supply than demand, and the price would fall.top executives, a famous investor selling shares of
However, the comprehension of the fact as to whythe company, an analyst downgrading his
the demand of a particular stock is high or low withrecommendation from 'buy' to 'hold', the loss of a big
the general public is quite tricky. For this, one has totime customer, many people selling shares, a factory
acquire knowledge to the insight of the likes andburn down, launching of a better product, scientists
dislikes of people and learn to analyze whether anyrating the product as unsafe, a lawsuit filed against
news related to a company will have a positive orthe company and a powerful competitor entering into
negative impact on the minds of the people, which inbusiness.
turn causes fluctuations in the prices. The mostHowever, the stocks at times fluctuate owing to
important factor that affects the value of agood or bad rumors or surprisingly due to no reasons
company is its earnings. Earnings are the profit aat all! Some believe that it is impossible to predict the
company makes.change in stock prices, while others believe that by
Undoubtedly, profits determine the long term survivaldrawing charts and looking at past price movements,
of any company in the business empire. Publicone can determine when to buy and sell. Truly
companies are required to report their earnings fourspeaking, no one can really know for sure. The only
times a year that is once in each quarter. Thesething that stands valid is that stocks are volatile and
seasonal earnings are very closely monitored bychange in price very rapidly. Therefore, whenever
analysts as the company's future value rests onyou think of investing, be prepared to handle the risk
them. If a company's results are better thanfactor!
expected, the price graph sees a high. If a company's