Monday, March 4

Reasons for share growth and decline: factors affecting stock exchange operations

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The specifics of trading on the exchange gives an opportunity to earn from operations with shares in case of their fall and growth. In this case, it is important to understand what happens to the rate and make the right decision in time. It is necessary to take into account the reasons for the growth and fall of shares to be always on the plus side.

Reasons for the growth and decline of shares: what affects the value of securities

Fluctuations in the value of shares are typical for the market situation, but if it happens frequently and with a large amplitude, then it is necessary to think about the reasons for this dynamics.
The increase in prices for this type of asset is due to various factors:

  • the company’s turnover or profits have increased. This led to an increase in shareholder dividends, which means that the firm’s assets have become of interest to more investors;
  • the situation in the industry itself has changed, there are positive trends for the development of the company;
  • The economic situation in the state has stabilized, prospects have opened up in the world market, which made it profitable to invest in this company.

Despite the complex structure, the activity on the stock exchange is subject to a simple principle of the market – high demand determines the high cost of the product. This means that the reason for share growth is the investors themselves, who regulate the level of interest in this or that asset. Of course, in the global sense, these processes are subject to the securities market as a whole, the global economy, the company’s activities and the level of development of the industry.
One investor or a group can cause exchange rate fluctuations. Decrease in share prices occurs by injecting a large number of securities into the market. It is much more difficult to increase the value.

Investors are not as inclined to react as they do to a drop in value. The frenzy around certain stocks is caused gradually, for example, by buying a controlling stake in order to develop and increase the company’s revenue. Then, over time, other investors will notice positive changes and want to buy shares. A vivid example of a sharp rise in securities: Google, Facebook and other IT projects, which in a short period of time gained huge turnover and became tidbits on stock exchanges.
Investor sentiment has a direct impact on the decline of shares. It depends on a number of objective and subjective factors:

  • company issues, profit reduction;
  • aggravation of situation in particular economic sector;
  • national economic difficulties;
  • growth dynamics of the world economy. Its slowdown is reflected in the situation on the stock exchange.

The fall of shares can be caused artificially: by fake news, collusion of investors, competitors’ activities. Therefore, it is not always worth panicking when the exchange rate falls and selling papers. Perhaps soon the situation will stabilize and shares will rise in price again.

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