Most Common Factors That Affect and Predict Stock Prices
2 min readWhat are the most frequently asked questions about stock market trading? What affects the stock price? In other words, what factors influence the stock price? Stock prices fluctuate due to fluctuations in supply and demand. When more people want to buy a particular stock, the price will go up. If more people want to sell the stock, the price will go down. Simply put, if there is negative news in the market, traders are more likely to sell, and the price will go down.
The most common factors affecting supply and demand that ultimately determine stock prices are as follows in no particular order:
Dividends
In general, after an ex-dividend share, the price falls around the dividend value that has to be paid.
Market sentiment
If the market is bearish, most of the stocks will follow and fall in price, if the sentiment is bullish, most of the prices will go up. A good way to gauge where the market is going is to look at the indices you are trading, for Australian traders will mostly be trading companies under the ASX – All Ordinaries.
Company revenue
Prices are ultimately determined by the trader’s perception of the firm’s value. If the company is not as profitable as traders, of course, this can cause prices to fall, and of course, this means that if the company releases better than expected it will cause prices to rise.
Unforeseen / Unforeseen circumstances
Examples of unforeseen circumstances that could affect prices include natural disasters or catastrophe 911. You will find that the main companies affected by natural disasters are insurance companies.
Takeovers, mergers & acquisitions
Generally a company that is taken over will experience an increase in price, a takeover of a company will decrease in price.
Interest rate changes
When the central bank releases changes in interest rates, this will also contribute to prices, as investors anticipate what this means for them concerning home loan interest rates, etc.
Industrial sector performance
Like market sentiment, industry performance can affect the share price of companies in that sector, in general, most companies in the industrial sector will follow the trend, this doesn’t always happen depending on what else. contributing factors at that.
Stock repurchase
When a company buys back shares, the price will go up because the available stock will have a higher demand.
Company announcements
Stock prices fluctuate as investors and traders try to predict earnings, management changes, and industry trends, when a company makes an announcement investors are unhappy about this it can force the stock price down.
War
I gave this category myself, war brings uncertainty to the world which of course affects prices too.
