Factors that Influence Stock Prices
Stock prices are affected by many variables. Understanding these
variables and keeping a close watch on events are important to every
trader and analyst. Business fundamentals play a huge role, but, so
do elements of human psychology (fear, greed, and investor
perception).
Internal factors relate to the company itself. Examples:
an announcement of poor or favorable earnings
earnings that are more or less than expected
earnings dividends,
major layoffs
labor problems,
new products,
management issues
accounting errors
scandals
mergers
External factors relate to world or national events. Examples:
political upheaval or war
international currency crisis
weather conditions that affect sales
the Fed’s adjustments of interest rates
employment figures that were higher or lower than expected
Additionally, industry information may impact an individual stock. The fortunes of an industry
as a whole tend to affect individual prices. Bad news, however, about one company may be
beneficial to another company.
By analyzing these factors, you will often learn a lot about why a stock did well or why it
performed poorly. Being aware of these influences will help you anticipate future stock
movements.
