Factors affecting the share prices
Introduction
In this article I will be writing about the few factors which affects the share prices moves up and down. I spoke to many investors, one thing I understood that most of them are investing on companies without having the fundamental knowledge on the stocks. They just want their money to be doubled with in one year. This article just writes down few suggestions to before start investing in the shares.
Company Specific News
If there is a good news about the company which directly affecting the company, the prices may increase. For example, xyz company enters into a new business where there is less competition, the share prices will increase with the expectation of more profit for the company in future.
In the last week, Bharti Airtel announced that it will acquire the Kuwait based Zain telecom for $10.6 billion. The share prices were declined more than 10% because investors felt the company is over valued and it may affect the Bharti’s profitability.
Investor has to keep close eye on the market and utilize the golden opportunities.
Quarterly Earnings
We know that every quarter company will announce the results of that particular. If the earnings are more than the prediction, price will increase otherwise will decrease.
Fresh Issue Of Shares
If a company is issuing the fresh shares, then share prices will come down because the profit will be shared with more investors then before.
BuyBack
This is when the company buys back its own shares. As the number of shares decline, the company’s earnings will be distributed to fewer investors. As every investor is entitled to a larger share of company’s future earnings, its share price increases.
Summary
I hope this article will be useful for the new investors. It is only the very basic ideas about the share price changes. There are many numbers of factors affecting price changes. I will be writing it on my future articles. Thank you for reading this article!!
[Editor’s Note: This post is submitted by our Guest Blogger Krishna Srinivasan. Krishna is the founder of Thin-Plan-Invest. If you also want to write for EquiTipz, please check this. Stay tuned for our Revenue Sharing Program to be announced.]
Nice Blog.. Quite informative and Usefull for those who are into stock market.
Thanks For sharing
Regards-
Nifty Tips
.-= Nifty Tips´s last blog ..Nifty Tips- Tomorrow market position and Recommendation =-.
Thank you very much mate… Enjoy your stay at EquiTipz 🙂
Below is just a little information from my small unique book “The small stock trader”:
It is generally believed that about 50 percent of stock price movements are influenced by the market sentiment, about 25 percent by the industry, and only about 25 percent is the result of company-specific news (this percentage is higher with small caps). I am not sure about the exact percentages, but it is definitely true that non-company-specific news has a much more significant impact on stock prices than companyspecific news. One could argue that since about 75 percent of the stock price movement is the result of non-company-specific news, it would be wiser just to focus on the non-company-specific news and ignore the company-specific news. However, it is this company-specific news that you can somehow try to forecast. There may be over 100 different and unpredictable non-companyspecific catalysts that affect stock prices. So, you should focus your research on company-specific news and just scan macro news, especially if you are focusing on a few small caps. Some of the most frequent catalysts that may affect the stock prices of your focus stock are:
• Market sentiment (GDP, inflation, monetary policy, fiscal policy, government regulations, unemployment, consumption, trade balance, other financial and commodity markets, political and international affairs, nuclear and climate change challenges, military wars, currency wars, cyber wars, natural disasters, conflicts in the Middle East, Asia, globalization issues, etc.)
• Industry
• Corporate results
• Profit/loss taking
• Institutional buying/selling
• Analyst ratings
• Dividends
• Insider trading
• Share buybacks
• Promotion
• Shareholder activism
• New management, products, orders, or shareholders
• Reorganizations
• Right issues
• Stock splits
• Inclusion in an index
• Calendar effects
I hope the above little information from my small unique book was a little helpful!
Mika (author of “The small stock trader”)