From the course: Finance Foundations
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Publicly traded shares: What impacts the share price?
From the course: Finance Foundations
Publicly traded shares: What impacts the share price?
- Who sets the price of the shares of stock trading in the stock market? Well, consider these related questions. Who sets the price of a gallon of milk? Who sets the price of a gallon of gasoline? Who sets the selling price of a house? The answer to all these questions is that no one sets the price in the 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 will 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. That is how the prices of milk, gasoline, houses, children's clothing, and every other price is determined in a freely functioning market. In the case of prices of shares…
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