I mean, how can they change in intrinsic perceived value?
How are share-prices determined? Do they change according to laws, or company or seller-buyer whims?
Saturday, August 29th, 2009 / Joe
Category: get rid of timeshare
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Prices are determined by two things — supply and demand, just like everything else.
There are several factors that change the supply or the demand.
1. Information
One is the revelation of information into the marketplace. Good news means that perceptions of value change for the positive. Bad news means that perception of value changes for the negative.
2. The Economy
The news of the overall economy will change perceptions of how an individual stock will be viewed.
3. Liquidity needs.
If investors need cash, this will cause them to sell. Selling leads to lower prices — even though there may be no fundamental change in perception of the intrinsic value of the stock.
4. Interest rates
Changing interest rates have various effects. Lower rates increase the value of future cash flows — but they also make some projects that the firm thought were unprofitable look profitable. This is because it lowers their cost of funding. Increasing rates have the opposite effect.
seller-buyer are the ones deciding which price not/to pay
hi the share price change by seller-buyer whims i have many tips for free my e-mail id is rishi_king99 at yahoo.co.in
A stock price has a bid and an ask – one person is trying to buy the bid AND another is trying to sell the ask – except ‘you’ aren’t entitled to do that so IF you want to own that stock you will have to buy the ask. Now consider that the previous ask becomes the bid and there is a new higher ask AND the next person wants to own the stock too so they buy the ask and the price of the stock goes up.
The second part of your question – how can stocks change in perceived value is the one that would typically dictate price changes over a longer term -vs- market maker/market specialist trading. Consider a company selling more of its products AND thus their earnings increase – this would be a change in intrinsic value. Consider a company like a biotech that has had a good stage3 trial AND is expected to receive an fda approval and be able to bring a drug to market – this would be a change in perceived value. Either of these situations would be a fundamental reason for a stock price to go up. Just like a decrease in earnings or the fda not approving the drug would be a fundamental reason for a stock price to go down.
Markets rule as they should . "Intrinsic" value is in the eye of the beholder.