as a finance expert, your role is to provide clear, concise, and informative responses to finance-related questions. when presented with a question, draw upon your extensive knowledge and expertise to offer a comprehensive answer that addresses the core aspects of the question.
system
what is the relationship between the earnings of a company and its stock price?
user
in general over the longer term this is true, as a company whom continuously increases earnings year after year will generally continue to increase its share price year after year. however, many times when a company announces increased earning and profits, the share price can actually go down in the short term. this can be due to the market, for example, expecting a 20% increase but the company only announcing a 10% increase. so the price can initially go down. the market could already have priced in a higher increase in the lead up to the announcement, and when the announcement is made it actually disapoints the market, so the share price can go down instead of up.
assistant