February 22, 2020

These Factors Affect Stock Prices

The price of a stock is determined by the attraction between the power of the buyer and the seller, in other words, demand, and supply. Therefore, stock prices always change, according to the strength of this attraction. When demand increases, stock prices tend to rise. Conversely, when offers increase, stock prices tend to fall. That’s why you must read stock news often to monitor changes in stock prices.

This increase in demand and supply was influenced by 5 main factors, such as:

1. Company performance

Stock prices usually reflect the company’s performance. When the company’s performance is poor, stock prices usually go down. Conversely, if the company’s performance improves, stock prices also increase. The definition of company performance here is broad in scope, ranging from the performance of financial statements, company sales, launch of new products, news about the company, the impact of regulations related to the company, problems within the company, company actions such as dividend distribution, mergers, acquisitions, etc. so.

2. Industrial performance

Stock prices are influenced by the strength of the performance of their respective industrial sectors. Usually, the bright industrial sector also has an impact on company performance in the sector. So that the price of shares in the sector on average is higher than shares of other sectors.

3. Macroeconomics

The economic condition of a country and its relationship with other countries also affect the country’s stock exchange. When the country’s economic conditions are bright, purchasing power is increasing, the stock market is also rife, and the average stock price tends to rise. Conversely, when the country’s economic downturn is usually also reflected in weaker share prices. Therefore the announcement of policies and economic indicators of the country such as interest rates, inflation, the trade balance will be observed by stock investors.

4. Market sentiment

Market participants’ sentiments also influence the movement of stock prices. Optimistic and euphoric market players will usually drive up stock prices. Conversely, panic market participants will push stock prices down.

5. Other factors

There are various other factors that are not directly related to the market or the economy but can also affect stock price movements. For example political conditions, war, conflict, terrorism, natural disasters, and so on.