Stocks don't have a fixed value. Their
values fluctuate based on a number of factors, including:
The company's earnings,
performance, and future prospects
Investor sentiment, or
demand
The investment growth and
dividend income the stock seems poised to provide to investors,
called return
on investment
The condition of the economy
and the financial markets
Investor demand
People buy a stock when they believe it's
a good investment, driving the stock price up. But if people think
a company's outlook is poor, and either don't invest
or sell shares they already own, the stock price will fall. In
effect, investor expectations determine the price of a stock.
For example, if lots of investors buy Stock
A, its price will be driven up. The stock becomes more valuable
because there is demand for it. But the reverse is also true.
If a lot of investors sell Stock Z, its price will plummet. The
further the stock price falls, the more investors sell it off,
driving the price down even more.
