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why do stock prices change? [duplicate]
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in addition to d. stanley's very fine answer, the price of stocks change as a result of changing market conditions and the resulting investor estimation of its effect on the company's future earnings. take these examples. right now, in the usa, there is a housing shortage; that is, there are fewer houses available for purchase than there are willing buyers. investors will correctly assume that the future earnings of home builders will be higher than they were, say ten years ago. seeking to capitalize on these higher earnings, they will try to buy the stocks. however, the current owners of the stock, potentially the sellers, know the same thing as the investor-buyer and therefore demand a premium to entice a sale. the price of the stock has risen. the reverse is true, also. brick and mortar retailers are declining as more consumers prefer on-line retail shopping. the current owners of these stocks will probably want to sell their stock before it is worth even less. the investor-buyer also knows the same facts; that future earnings will most likely be less for these companies. the potential buyer offers a very low price to entice a sale. the price of the stock has fallen. finally, the price of stocks rise and fall with general market conditions. as an example, assume that next months jobs report is released showing that 350,000 new jobs were created in july. investors will believe that if companies are hiring, then the companies are doing well; they are selling products and services at a higher than expected rate, requiring that they add new employees. they will also conclude that those 350,000 new employees will be spending their salaries to buy not just food, clothing and shelter, but also a few luxuries like a newer car, a tv, perhaps even a new home (please see paragraph 2!). all of these companies will have more business, more earnings and, likely, a higher stock price.
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