What are the major factors that affect a stock's price?

[Qacer]

My friend was telling me about his market experience, and I got to wondering what other factors would affect the market price besides demand & supply. The first two things that came to mind were: weather and government policy. But then, I got to thinking that an employee strike at one company might affect another, so pretty much, it's some sort of butterfly effect involving many other factors.

With all these factors involved, it'd be pretty difficult to keep them all in track, so I figured luck would also play a big part. What do you all think?

Really, when I see infomercials advertising a "winning" system to play the stock market game I always look at it skeptically. I just find it hard to believe to base a system solely on the characteristics of a chart rather than finding the overall picture.

 

[alien42]

revenue growth and potential play a very large role in determining a fair PE ratio

it also varies by exchange, otc and pink sheets are very different then nasdaq or nyse

 

[darkxshade]

Hedge funds

 

[EGGO]

I still say everything will affect it. From politics, to trends, to weather, inventions, marketing, a LOT.

 

[LS20]

the air-speed velocity of an unladen swallow

 

[KarmaPolice]

thats an extreamly complicated question. The answer is pretty much everything, including luck. And no there is no one winning system. If there was everyone would do it.

 

[andylawcc]

Originally posted by: LS20
the air-speed velocity of an unladen swallow

West African or Asian?

 

[greatfool66]

Nothing besides supply and demand affects the price of anything, except maybe government regulation or something.

What you're looking for is called fundamental analysis ( ie the underlying business, economic conditions ect) which is a completely different from technical analysis (charting) that uses only market data to try to predict prices.

I'd say the biggest fundamental factors affecting the average stock are sector strength and the overall state of the economy. Of course individual stocks may have other factors that are way more important like oil prices help oil stocks, fda approval might help a drug company etc so you really have to go by industry.

 

[XZeroII]

It's 100% determined by what people are willing to buy and sell each share for. Those other factors that were mentioned mearly influence what people are willing to buy and sell for... and people are unpredictable and irrational.

 

[ShadoWing]

actually, it's been scientifically proven that a butterfly flapping its wings in China can topple Microsoft.

 

[Miramonti]

Originally posted by: Qacer
My friend was telling me about his market experience, and I got to wondering what other factors would affect the market price besides demand & supply. The first two things that came to mind were: weather and government policy. But then, I got to thinking that an employee strike at one company might affect another, so pretty much, it's some sort of butterfly effect involving many other factors.

With all these factors involved, it'd be pretty difficult to keep them all in track, so I figured luck would also play a big part. What do you all think?

Really, when I see infomercials advertising a "winning" system to play the stock market game I always look at it skeptically. I just find it hard to believe to base a system solely on the characteristics of a chart rather than finding the overall picture.

greatfool66 hit it on the head, you're comparing investment factors over the long term, vs. trading decision factors which analyzes price movement.

I've traded for a long time and follow little to nothing about industries or company specifics (except 'breaking' news), and rely solely on charts to help me distinguish shortterm price aberrations (noise) from longterm direction, and trade accordingly. Breaking it down this way and doing it thousands of times each year makes it simple statistics, rather than getting involved in all of the individual fundamental factors that affect a company's stock price potential over the long term.

Trading has a much greater potential for profits than investing there are more opportunities to take advantage of a stock's price aberrations over the short term than there is to sit and wait for a stock to eventually be higher by the end of the year than it was at the beginning etc., and miss the volatility opportunities in between.

Charting programs that traders use are like calculators tho, they calculate and display only what you tell it to. The 'trading systems' that these infomercials include in their charting programs tho are fairly suicidal tho when not applied with more in depth analysis. However the premise of taking a 'system' that has a statistical advantage of being successful over time, even if its a very small advantage, and applying it over and over again is sound. (and is what professional arbitrage firms do, which makes up about 80-90% of the volume on the exchanges.)

 

[TallBill]

Luck does not exist.

 

[Qacer]

Hmm.. I see. So when people talk about using the charts they are mostly referring to some day-trading type of investment.