Stock price means the price of a company’s stock at any given point of time available for trading. In other words, it is the price at which a buyer is ready to purchase the stock and seller is ready to sell. This means there is nothing like ‘Maximum Retail Price’ tag on this product. Stock prices fluctuate almost every minute (or maybe every second). It will not be out of place to know that stock market is a market of speculation. It is all about forecasting future of a company with total accuracy. And this is a very difficult proposition.


What affects stock prices?

There are two major factors that decide stock prices – one set comprising of technical factors. Another constitutes individual and collective sentiments in the market place. Technical factors include almost all the factors that are, to a large extent, predictable. Effect of economy on the company, company’s position in the market vis-a-vis competition, technical prowess of the company, company’s capabilities & resources. These factors can be studies in depth, and some objective conclusion can be drawn from that. For example, Microsoft shares will fetch long term returns in stocks as the competition, if at all, will take another ten years to come anywhere near Microsoft. That makes Microsoft stocks a very strong contender for investment today. In addition, the company’s cash position is also enviable. Can the same be told about GM today? Probably no. With its latest results out in the open, some shakiness can be seen on the price front. This makes stock prices of Microsoft stronger than those of GM (or Ford for that matter).

Sentiments form another category, which no social scientist has been able to fully explain. It is the collective psychology of the people in the trade that determines the fall or rise of stock price. A small piece of news, rather unrelated to the business of the company can badly affect the stock price of a company. For example, you may witness a drop in stock prices of Intel, if a news item in a newspaper claims that a new & economical IC technology has been mastered by some young cracks in Korea.
We have heard of stock prices going down when president of a country goes abroad on an official visit. What explains this? Nobody has any clue about this.

What can be concluded is that one can study the scientific pattern out of stock prices; it is very difficult to put the subjectivity in a ‘model’ form.

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