How does the share price rise
If this question could be answered with certainty with regard to individual stocks, there would certainly be a few more millionaires in the world. However, there are of course known situations and conditions that can affect the price of stocks. As with any commodity traded, the basis for whether share prices rise or fall is basically the existing supply and demand. If a share is in high demand, its value (price) rises; most investors want to sell a share, the price of the shares falls. The real and much more interesting question is why the demand and supply for stocks in general and in particular is increasing. So why are stock prices falling or rising? There are many reasons to be mentioned here, which, however, can also be divided into different categories for the sake of simplicity. The economy itself, the political situation (national and international), other financial factors, such as exchange rates and interest rates, and of course so-called psychology also play a major role, have a not inconsiderable influence on the development of share prices the change in stock prices. On a "small scale", of course, the economic situation of the respective company and also the situation in the respective industry influence how individual stocks develop. Let us now go through the different influencing factors one after the other.
Economic situation: The overall economic situation has a very big influence on whether the share prices tend to fall or rise, which has been particularly evident in the last 12 months. At the beginning of the financial crisis, share prices collapsed almost worldwide because the outlook for the economy in the near future was very negative. For the economy itself - these are of course the different companies in their entirety - a bad economic situation also means that the profit of the individual company and the stock corporation will decrease or even losses will be made. It is easy to understand that these statements have a negative effect on the value / price of the shares. On the other hand, share prices can rise again just as quickly if the economic outlook (as is currently the case) is better again. As a result, stock exchanges around the world have occasionally posted gains of 50 percent and more in the last few months. The slightly simplified reason in this area is: If the economy is doing well, share prices will rise. Of course, you have to look at individual regions from time to time, because if the economy in Japan (as an example) has problems with its development and therefore share prices on the Tokyo stock exchange fall, this does not fundamentally mean that prices in Europe will also fall.
Political situation: The political situation, be it domestically or globally, also has an impact on the development of share prices. The "best" example in the recent past is, for example, the attack on the Word Trade Center in 2001, which, from a political point of view, basically led to a global crisis and instability. The result was that share prices collapsed. It has often been seen that political crises, depending on their importance, can sometimes have a very negative effect on share prices. National events can also play a role here. For example, if the grand coalition in Germany had ended prematurely, it would certainly have led to a minor crisis and caused share prices, at least in Germany, to fall. Other financial factors also affect share prices. For example, a kind of rule of thumb is the fact that if interest rates on the capital market fall, mostly due to the lowering of the key ECB interest rate, then share prices tend to rise. The reason is that when interest rates fall, fewer investors are already investing in interest-bearing securities or other interest-bearing financial investments, but increasingly in stocks. Conversely, rising interest rates often mean that stock prices will initially fall. There is a similar relationship between foreign exchange rates and stocks. If, for example, the exchange rate of the euro falls against the US dollar, this is generally viewed as negative for the economy in Germany or Europe, which results in falling share prices in Europe. In the USA, on the other hand, share prices will tend to rise due to the development of the exchange rate.
Psychological factors: The so-called psychological factors that can have an influence on share prices are also not to be underestimated today. The terrible word on any stock market is "fear". When the majority of investors are afraid that their shares will lose value for a variety of reasons, quite a few investors tend to sell the shares quickly, which is the actual trigger for the falling share prices. If, on the other hand, there is positive news or just rumors and speculations, the prices can rise very quickly and also sharply, even if objectively there can be hardly any truth in the rumors. So the mood of investors plays an enormous role when you look at the development of share prices. If, for example, a very bad opinion about the future development of share prices prevails across the board, this can also lead to so-called panic selling and sometimes to a "crash". There does not even have to be an objective reason for the negative outlook and assessments.
news: Of course, share prices rise or fall not only due to "global" and higher-level events or situations, but of course often when there is news and news in the respective company that has an impact on the stock corporation and thus on the shares and their value. The annual balance press conferences are a classic example. If, for example, it becomes known at such a press conference that a company's profit has been higher than previously expected, this almost always has a very positive impact on the company's share price and sometimes even on other companies in the same industry. On the other hand, of course, negative news (slump in profits, takeovers or the like) very often lead to falling share prices. Here, too, the falling share price of the company concerned can also have a negative impact on the entire industry. Overall, it can be said that being able to justify why share prices fall and rise is almost a science in itself. Above all, one should be aware of how many different factors can have an influence on stock prices, which one can sometimes neither predict nor "plan" for.
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