Thursday, February 15, 2007

Share price determination

Ultimately, at any given moment, an equity's price is strictly a result of supply and demand. The supply is the number of shares offered for sale at any one moment. The demand is the number of shares investors wish to buy at exactly that same time. The price of the stock moves in order to achieve and maintain equilibrium.

When buyers outnumber sellers, the price rises. Eventually sellers enter, and/or buyers leave, achieving equilibrium between buyers and sellers. When sellers outnumber buyers, the price falls. Eventually buyers enter, and/or sellers leave, again achieving equilibrium.

Thus, what a share of a company at any given moment is determined by all investors voting with their money. If more investors want a stock and are willing to pay more, the price will go up. If more investors are selling a stock and there aren't enough buyers, the price will go down.

Continue Reading



At July 30, 2009 at 2:25 AM , Blogger vandana said...

u had given thoertical answer plz give some practical explanation


Post a Comment

Subscribe to Post Comments [Atom]

<< Home