Determinants of Share Value
Most of the investors know the thumb rule of the stock market which inscribes them to sell a share when share value is high. But few of them know about the factors that determine the share value. For making smart moves in share market an investor needs to know the causes why share prices fluctuate. This makes an investor capable, of understating the market and selecting the appropriate stocks to make his investment portfolio strong.
An investor needs to comply with the fact, no matter how weird it may sound, the news media channels play a great role in determining the movement of share value. News on a specific issue of a company like change of company policy or management can make the share price of that relevant company move up or down. Similarly, news on general issues like interest rate, inflation or employment rate can equally influence share prices.
When we look at the basic operation of the share market, supply and demand of company shares act as price determinants. This theory of demand and supply is simple to understand but there remain countless factors that influence the demand and supply forces.
When we are discussing over share value we must take into account the internal factors of a company which influences the demand and supply of its share in the market and then the share value. Companies listed in the stock market are judged by its internal factors such as quarterly earnings, management skills, growth prospects etc. Any company which reflects positive connotation on all these factors is attractive for investors and then the demand for it is pretty high. This boosts the share value considerably. The converse is also true when a company reflects a poor growth prospect.
However, an investor needs to consider the external factors or rather the general factors that influence share value. By stating general factors, I focus on the economic parameters. A healthy economy with sound economic parameters makes the share market run productively. In case there is any change in economic economic factors rate of interest, inflation rate or GDP of a country, then it affects the share market instantly. In case there is any change in these critical factors it will affect the listed companies as well. Consequently the share prices of these companies will be affected as well.
Investing in share market is not a sheer gambling, it is a planned management of portfolio that is backed with constant research over listed companies and the overall economy.