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Dec 2, 2013

Source: http://corlissonlinegroup.com/share.html

The phenomenon of share prices moving up or down is a dynamic process worth looking into and understanding in order to appreciate what is happening and how it affects one’s investment. The website attributes the movements to “supply and demand” – the ubiquitous main players in the whole economic or business world.

And so, a share price goes up when certain conditions are present. Let us discuss them one by one. “When a firm is making big profits”, the demand for it goes up and the price follows suit. Obviously, people would want to become part owner of a company that is making it big. But who decides the price should go up? The company or the market? The website does not explain further. Perhaps, it is a secret or an unnecessary information for the investor. Really? We all have the right to know.

The second reason is that “many people want to buy the shares to get the rewards of the profits.” This is not so obvious a reason as the first. It seems similar or the very same first reason above. This probably applies to companies that are already highly valued.

Third, “few people want to sell the shares.” Again, this is merely the reverse of the second and which could be a result of the first reason. We seem to be going around in circles here. So far, we only have one viable reason for prices to go up.

Last reason provided is “only a few shares are available to buy.” Now, that looks like a different reason. But then again, it an indirect result of the first reason.

Looking at the other side of the picture merely presents a mirror image of what we just went through above. In short, supply and demand, even for shares, totally depends on the profitability of companies. Nothing more.

One wonders if this simple survey of the stock market is overly simplistic or is it that we can look at the whole process as a simple one and that somewhere the complexity is an artificial characteristic that is manufactured to confuse or deceive people? And the plot thickens.

Visibility: Everyone
Posted: Monday December 2, 2013, 9:29 pm
Tags: group online financial Mag Corliss [add/edit tags]

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Estella Green
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