What Affects the Share Price? Learn More About Trading Today in This Article
Posted On January 23, 2021
What Is a Share?
In order to start up, develop, function and grow, companies need money. They get this capital from professionals in the financial world, but also from savers. As a saver, you receive a share in exchange for a piece of capital. To put it simply, we can say that a share is ownership of part of a company’s capital. If you buy a share, you invest actively in a company and are therefore a shareholder. But how does this work, and where can you buy stocks? This guide explains perfectly how you can buy stocks at online brokers in Spain.
Why Does the Price of a Share Fluctuate?
On a stock market or stock exchange, the prices of shares fluctuate continuously in function of supply (sellers) and demand (buyers). When there are more buyers than sellers, the price of the shares goes up. And when there are more sellers than buyers, the price of the shares goes downhill.
Several factors can be at the basis of significant price movements.
Information About the Economy
To give just one example, if a country such as Greece is having a particularly difficult time managing its public finances, this has a negative impact on Greek banks (and therefore on their share prices). A sharp rise in unemployment has a negative impact on the purchasing power of the average consumer in that country, and thus, for example, on the sales figures (and share prices) of car manufacturers.
Information on the Sector of Activity
Some events have a specific impact on certain sectors of activity rather than on the economy of a particular country or region as a whole. For example, a low oil price has a negative impact on the profits and investment levels of the large oil and gas groups (and therefore also on their share). Source:CommodityTradeAlert
Information Regarding the Company Itself
Certain events have a direct impact on the company in question, and that impact is all the greater the more serious and protracted the expected impact on that company’s activities. For example, the signing of a major contract, a financial scandal, or a sudden improvement or deterioration in the profitability of a company may increase or decrease its share price.
Such information has an impact on share prices on a daily basis. Once the investor has gathered this information, he can interpret it and try to assess its impact on the company. If he assumes that a company’s profits will increase, he will take the share in a portfolio, which will drive the price higher.