From the course: Corporate Finance Foundations
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Publicly traded shares: What impacts the share price?
From the course: Corporate Finance Foundations
Publicly traded shares: What impacts the share price?
- So who sets the prices of the shares of stock trading in a stock market and what factors influence those prices? Well consider these related questions. Who sets the price of a gallon milk? Who sets the price of a gallon of gasoline? Who sets the selling price of a house? The answer to all of these questions is that no one sets the price in a market. Instead the price arises from the interactions of the buyers and sellers in the market. If the price is too low, buyers will flood the market, sellers will quickly sense this and will insist on a higher price. If the price is too high, sellers flood the market, and buyers will be able to be choosy, they won't buy unless prices are lowered. The human interactions in the market aggregate all information available until both the sellers and the buyers agree that the price fairly reflects that information. So that's how the prices of milk, gasoline, houses, children's…
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