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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

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