Basic facts about stock price movement
- 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.
- Theoretically earnings are what affect investors' valuation of a company, but there are other indicators that investors use to predict stock price. Remember, it is investors' sentiments, attitudes, and expectations that ultimately affect stock prices.
- There are many theories that try to explain the way stock prices move the way they do. Unfortunately, there is no one theory that can explain everything