What actually drives a stock price up ou down?











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Can someone please explain to me how stock prices go up and down? What are the underlying physical and information technology phenomena and algorithms that drive a stock up or down? Books just say that a stock price reflects what their owners think the stock is worth and not what it is actually worth.



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  • Seeing as this is quant.se and money.se, can it be assumed that you aren't just asking where the price is decided, but you're asking for a deeper explanation of why people do the things that move the price?
    – immibis
    3 hours ago












  • I'm puzzled by what you mean by "information technology phenomena and algorithms" affecting a stock's price. Perhaps you're asking about how algorithm trading affects stock prices, or perhaps you're asking what criterion it uses to make buy/sell decisions. The latter is probably all proprietary voodoo that nobody is allowed to talk about.
    – James K Polk
    2 hours ago















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Can someone please explain to me how stock prices go up and down? What are the underlying physical and information technology phenomena and algorithms that drive a stock up or down? Books just say that a stock price reflects what their owners think the stock is worth and not what it is actually worth.



Thank you for your feedback.










share|improve this question









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  • Seeing as this is quant.se and money.se, can it be assumed that you aren't just asking where the price is decided, but you're asking for a deeper explanation of why people do the things that move the price?
    – immibis
    3 hours ago












  • I'm puzzled by what you mean by "information technology phenomena and algorithms" affecting a stock's price. Perhaps you're asking about how algorithm trading affects stock prices, or perhaps you're asking what criterion it uses to make buy/sell decisions. The latter is probably all proprietary voodoo that nobody is allowed to talk about.
    – James K Polk
    2 hours ago













up vote
1
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1









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Can someone please explain to me how stock prices go up and down? What are the underlying physical and information technology phenomena and algorithms that drive a stock up or down? Books just say that a stock price reflects what their owners think the stock is worth and not what it is actually worth.



Thank you for your feedback.










share|improve this question









New contributor




Joselin Jocklingson is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
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Can someone please explain to me how stock prices go up and down? What are the underlying physical and information technology phenomena and algorithms that drive a stock up or down? Books just say that a stock price reflects what their owners think the stock is worth and not what it is actually worth.



Thank you for your feedback.







market-data market-microstructure market-making market financial-markets






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edited 4 hours ago









Daneel Olivaw

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  • Seeing as this is quant.se and money.se, can it be assumed that you aren't just asking where the price is decided, but you're asking for a deeper explanation of why people do the things that move the price?
    – immibis
    3 hours ago












  • I'm puzzled by what you mean by "information technology phenomena and algorithms" affecting a stock's price. Perhaps you're asking about how algorithm trading affects stock prices, or perhaps you're asking what criterion it uses to make buy/sell decisions. The latter is probably all proprietary voodoo that nobody is allowed to talk about.
    – James K Polk
    2 hours ago


















  • Seeing as this is quant.se and money.se, can it be assumed that you aren't just asking where the price is decided, but you're asking for a deeper explanation of why people do the things that move the price?
    – immibis
    3 hours ago












  • I'm puzzled by what you mean by "information technology phenomena and algorithms" affecting a stock's price. Perhaps you're asking about how algorithm trading affects stock prices, or perhaps you're asking what criterion it uses to make buy/sell decisions. The latter is probably all proprietary voodoo that nobody is allowed to talk about.
    – James K Polk
    2 hours ago
















Seeing as this is quant.se and money.se, can it be assumed that you aren't just asking where the price is decided, but you're asking for a deeper explanation of why people do the things that move the price?
– immibis
3 hours ago






Seeing as this is quant.se and money.se, can it be assumed that you aren't just asking where the price is decided, but you're asking for a deeper explanation of why people do the things that move the price?
– immibis
3 hours ago














I'm puzzled by what you mean by "information technology phenomena and algorithms" affecting a stock's price. Perhaps you're asking about how algorithm trading affects stock prices, or perhaps you're asking what criterion it uses to make buy/sell decisions. The latter is probably all proprietary voodoo that nobody is allowed to talk about.
– James K Polk
2 hours ago




I'm puzzled by what you mean by "information technology phenomena and algorithms" affecting a stock's price. Perhaps you're asking about how algorithm trading affects stock prices, or perhaps you're asking what criterion it uses to make buy/sell decisions. The latter is probably all proprietary voodoo that nobody is allowed to talk about.
– James K Polk
2 hours ago










2 Answers
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The short answer: many factors. The following are some key ones:




  1. Reported Trades - Stocks are quoted "bid" and "ask" rates. These are the traders setting their prices much similar to a local farmers market trading their produce.

  2. Volume - number of shares traded.

  3. Price trend - When the bid volume is higher than the ask volume, the selling is stronger, and the price is more likely to move down than up. When the ask volume is higher than the bid volume, the buying is stronger, and the price is more likely to move up than down.

  4. Institutional actions - Institutions account for most of the trading in larger stocks, so their action usually has the most influence on the stock price.


References:





  1. https://finance.zacks.com/can-tell-direction-stock-price-looking-bid-vs-ask-volume-2758.html

  2. https://money.stackexchange.com/questions/35686/how-is-stock-price-determined






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    Stocks are usually traded by (one or more) Market Maker(s), who stand ready to sell to you at a price $s_a$ or buy from you at a price $s_b$. Since $s_a>s_b$ they make a profit if the price does not change. However, they also own stock themselves (between the time you sell it to them and someone else buys it from them). They have to manage this "inventory" carefully.



    If $s_a,s_b$ are too high (higher than the market consensus) they will find that a lot of people want to sell to them and no one want to buy. Their inventory will rapidly increase and they will be stuck with a lot of unsaleable stock. Vice versa if $s_a,s_b$ is too low, a lot of people want to buy no one wants to sell, their inventory will quickly go to zero and they will be out of business again.



    As a result market makers are very sensitive to the balance of supply and demand from investors. They constantly adjust their prices, lowering it if it seems there is excess supply (more sellers than buyers) and raising it it if they see excess demand. Price will quickly adjust to the momentary supply/demand for the stock from investors.



    The prices in other markets (food, housing) also adjusts to supply and demand, but not as quickly. It takes a long time for a food store to adjust its sales prices, and even longer for the seller of a house to adjust. With stocks the adjustment is nearly instantaneous (because many people can buy or sell the item instantly in a central two-way market).






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      2 Answers
      2






      active

      oldest

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      2 Answers
      2






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      active

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      active

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      up vote
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      down vote













      The short answer: many factors. The following are some key ones:




      1. Reported Trades - Stocks are quoted "bid" and "ask" rates. These are the traders setting their prices much similar to a local farmers market trading their produce.

      2. Volume - number of shares traded.

      3. Price trend - When the bid volume is higher than the ask volume, the selling is stronger, and the price is more likely to move down than up. When the ask volume is higher than the bid volume, the buying is stronger, and the price is more likely to move up than down.

      4. Institutional actions - Institutions account for most of the trading in larger stocks, so their action usually has the most influence on the stock price.


      References:





      1. https://finance.zacks.com/can-tell-direction-stock-price-looking-bid-vs-ask-volume-2758.html

      2. https://money.stackexchange.com/questions/35686/how-is-stock-price-determined






      share|improve this answer








      New contributor




      Socratees Samipillai is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
      Check out our Code of Conduct.






















        up vote
        2
        down vote













        The short answer: many factors. The following are some key ones:




        1. Reported Trades - Stocks are quoted "bid" and "ask" rates. These are the traders setting their prices much similar to a local farmers market trading their produce.

        2. Volume - number of shares traded.

        3. Price trend - When the bid volume is higher than the ask volume, the selling is stronger, and the price is more likely to move down than up. When the ask volume is higher than the bid volume, the buying is stronger, and the price is more likely to move up than down.

        4. Institutional actions - Institutions account for most of the trading in larger stocks, so their action usually has the most influence on the stock price.


        References:





        1. https://finance.zacks.com/can-tell-direction-stock-price-looking-bid-vs-ask-volume-2758.html

        2. https://money.stackexchange.com/questions/35686/how-is-stock-price-determined






        share|improve this answer








        New contributor




        Socratees Samipillai is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
        Check out our Code of Conduct.




















          up vote
          2
          down vote










          up vote
          2
          down vote









          The short answer: many factors. The following are some key ones:




          1. Reported Trades - Stocks are quoted "bid" and "ask" rates. These are the traders setting their prices much similar to a local farmers market trading their produce.

          2. Volume - number of shares traded.

          3. Price trend - When the bid volume is higher than the ask volume, the selling is stronger, and the price is more likely to move down than up. When the ask volume is higher than the bid volume, the buying is stronger, and the price is more likely to move up than down.

          4. Institutional actions - Institutions account for most of the trading in larger stocks, so their action usually has the most influence on the stock price.


          References:





          1. https://finance.zacks.com/can-tell-direction-stock-price-looking-bid-vs-ask-volume-2758.html

          2. https://money.stackexchange.com/questions/35686/how-is-stock-price-determined






          share|improve this answer








          New contributor




          Socratees Samipillai is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
          Check out our Code of Conduct.









          The short answer: many factors. The following are some key ones:




          1. Reported Trades - Stocks are quoted "bid" and "ask" rates. These are the traders setting their prices much similar to a local farmers market trading their produce.

          2. Volume - number of shares traded.

          3. Price trend - When the bid volume is higher than the ask volume, the selling is stronger, and the price is more likely to move down than up. When the ask volume is higher than the bid volume, the buying is stronger, and the price is more likely to move up than down.

          4. Institutional actions - Institutions account for most of the trading in larger stocks, so their action usually has the most influence on the stock price.


          References:





          1. https://finance.zacks.com/can-tell-direction-stock-price-looking-bid-vs-ask-volume-2758.html

          2. https://money.stackexchange.com/questions/35686/how-is-stock-price-determined







          share|improve this answer








          New contributor




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          share|improve this answer



          share|improve this answer






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          answered 6 hours ago









          Socratees Samipillai

          1212




          1212




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              up vote
              1
              down vote













              Stocks are usually traded by (one or more) Market Maker(s), who stand ready to sell to you at a price $s_a$ or buy from you at a price $s_b$. Since $s_a>s_b$ they make a profit if the price does not change. However, they also own stock themselves (between the time you sell it to them and someone else buys it from them). They have to manage this "inventory" carefully.



              If $s_a,s_b$ are too high (higher than the market consensus) they will find that a lot of people want to sell to them and no one want to buy. Their inventory will rapidly increase and they will be stuck with a lot of unsaleable stock. Vice versa if $s_a,s_b$ is too low, a lot of people want to buy no one wants to sell, their inventory will quickly go to zero and they will be out of business again.



              As a result market makers are very sensitive to the balance of supply and demand from investors. They constantly adjust their prices, lowering it if it seems there is excess supply (more sellers than buyers) and raising it it if they see excess demand. Price will quickly adjust to the momentary supply/demand for the stock from investors.



              The prices in other markets (food, housing) also adjusts to supply and demand, but not as quickly. It takes a long time for a food store to adjust its sales prices, and even longer for the seller of a house to adjust. With stocks the adjustment is nearly instantaneous (because many people can buy or sell the item instantly in a central two-way market).






              share|improve this answer



























                up vote
                1
                down vote













                Stocks are usually traded by (one or more) Market Maker(s), who stand ready to sell to you at a price $s_a$ or buy from you at a price $s_b$. Since $s_a>s_b$ they make a profit if the price does not change. However, they also own stock themselves (between the time you sell it to them and someone else buys it from them). They have to manage this "inventory" carefully.



                If $s_a,s_b$ are too high (higher than the market consensus) they will find that a lot of people want to sell to them and no one want to buy. Their inventory will rapidly increase and they will be stuck with a lot of unsaleable stock. Vice versa if $s_a,s_b$ is too low, a lot of people want to buy no one wants to sell, their inventory will quickly go to zero and they will be out of business again.



                As a result market makers are very sensitive to the balance of supply and demand from investors. They constantly adjust their prices, lowering it if it seems there is excess supply (more sellers than buyers) and raising it it if they see excess demand. Price will quickly adjust to the momentary supply/demand for the stock from investors.



                The prices in other markets (food, housing) also adjusts to supply and demand, but not as quickly. It takes a long time for a food store to adjust its sales prices, and even longer for the seller of a house to adjust. With stocks the adjustment is nearly instantaneous (because many people can buy or sell the item instantly in a central two-way market).






                share|improve this answer

























                  up vote
                  1
                  down vote










                  up vote
                  1
                  down vote









                  Stocks are usually traded by (one or more) Market Maker(s), who stand ready to sell to you at a price $s_a$ or buy from you at a price $s_b$. Since $s_a>s_b$ they make a profit if the price does not change. However, they also own stock themselves (between the time you sell it to them and someone else buys it from them). They have to manage this "inventory" carefully.



                  If $s_a,s_b$ are too high (higher than the market consensus) they will find that a lot of people want to sell to them and no one want to buy. Their inventory will rapidly increase and they will be stuck with a lot of unsaleable stock. Vice versa if $s_a,s_b$ is too low, a lot of people want to buy no one wants to sell, their inventory will quickly go to zero and they will be out of business again.



                  As a result market makers are very sensitive to the balance of supply and demand from investors. They constantly adjust their prices, lowering it if it seems there is excess supply (more sellers than buyers) and raising it it if they see excess demand. Price will quickly adjust to the momentary supply/demand for the stock from investors.



                  The prices in other markets (food, housing) also adjusts to supply and demand, but not as quickly. It takes a long time for a food store to adjust its sales prices, and even longer for the seller of a house to adjust. With stocks the adjustment is nearly instantaneous (because many people can buy or sell the item instantly in a central two-way market).






                  share|improve this answer














                  Stocks are usually traded by (one or more) Market Maker(s), who stand ready to sell to you at a price $s_a$ or buy from you at a price $s_b$. Since $s_a>s_b$ they make a profit if the price does not change. However, they also own stock themselves (between the time you sell it to them and someone else buys it from them). They have to manage this "inventory" carefully.



                  If $s_a,s_b$ are too high (higher than the market consensus) they will find that a lot of people want to sell to them and no one want to buy. Their inventory will rapidly increase and they will be stuck with a lot of unsaleable stock. Vice versa if $s_a,s_b$ is too low, a lot of people want to buy no one wants to sell, their inventory will quickly go to zero and they will be out of business again.



                  As a result market makers are very sensitive to the balance of supply and demand from investors. They constantly adjust their prices, lowering it if it seems there is excess supply (more sellers than buyers) and raising it it if they see excess demand. Price will quickly adjust to the momentary supply/demand for the stock from investors.



                  The prices in other markets (food, housing) also adjusts to supply and demand, but not as quickly. It takes a long time for a food store to adjust its sales prices, and even longer for the seller of a house to adjust. With stocks the adjustment is nearly instantaneous (because many people can buy or sell the item instantly in a central two-way market).







                  share|improve this answer














                  share|improve this answer



                  share|improve this answer








                  edited 4 hours ago

























                  answered 4 hours ago









                  Alex C

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                  5,7011922






















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