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WHAT DRIVES STOCK PRICES: FUNDAMENTALS OR FLOWS? October 2021 Sam Wood, CFA & George Sugden “The stock market is filled with individuals who know the price of everything, but the value of nothing." Phillip Fisher It is no secret that 2021 has seen the most incredible inflows into stock markets. Annualized equity inflows
- Fundamental Factors
- Technical Factors
- News
- Market Sentiment
- The Bottom Line
In an efficient market, stock prices would be determined primarily by fundamentals, which, at the basic level, refer to a combination of two things: 1. An earnings base, such as earnings per share (EPS) 2. A valuation multiple, such as a P/E ratio An owner of common stockhas a claim on earnings, and earnings per share (EPS) is the owner's return on...
Things would be easier if only fundamental factors set stock prices. Technical factors are the mix of external conditions that alter the supply of and demand for a company's stock. Some of these indirectly affect fundamentals. For example, economic growthindirectly contributes to earnings growth. Technical factors include the following.
While it is hard to quantify the impact of news or unexpected developments inside a company, industry, or the global economy, you can't argue that it does influence investor sentiment. The political situation, negotiations between countries or companies, product breakthroughs, mergers and acquisitions, and other unforeseen events can impact stocks ...
Market sentiment refers to the psychology of market participants, individually and collectively. This is perhaps the most vexing category. Market sentiment is often subjective, biased, and obstinate. For example, you can make a solid judgment about a stock's future growth prospects, and the future may even confirm your projections, but in the meant...
Different types of investors depend on different factors. Short-term investors and traders tend to incorporate and may even prioritize technical factors. Long-term investors prioritize fundamentals and recognize that technical factors play an important role. Investors who believe strongly in fundamentals can reconcile themselves to technical forces...
Dec 17, 2021 · The lira’s big moment in 2021 came on November 18 when the central bank, in spite of soaring inflation, cut its policy rate for the third time since September, seemingly at Erdogan’s behest ...
Demand factors that affect share prices. Demand factors that can affect share prices include company news and performance, economic factors, industry trends, market sentiment and unexpected events such as natural disasters. Demand gives shares value. If there is no demand for a company’s shares, they will have no value.
- Senior Financial Writer
May 10, 2024 · In short—stock prices are the heartbeat of financial markets. They reflect the perceived value of a company by investors at any given moment. As such, understanding what drives these prices is essential for anyone interested in investing or even just keeping tabs on the economy. But how are stock prices determined, you might be wondering ...
Jul 5, 2021 · Before ‘Vaccine Monday’ (9 November 2020), share prices were still depressed, despite rising from their March lows. However, news of several highly effective Covid-19 vaccines sent markets ...
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Mar 22, 2021 · US Stock Returns and Earnings: Five-Year Rolling Returns. Earnings growth was winsorized at 350%. Perhaps the lack of correlation between stock returns and earnings growth is because investors focus on expected rather than current growth. Valuing a company is based on discounting future cash flows after all.
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