Why do stocks rise and fall?
Stocks rise and fall due to the following reasons :
– A more anticipated Bad News Announcement (stock price Falls)
– A better anticipated forecast of Good news Announcement ( Stock price Rises)
for instance company XYZ forecast that it will have earnings of 100,000 when afterwards after some period of time in date of actual announcement it is published 50,000 stock price falls if it was higher stock price might rise according to how the people and financial markets anticipate the news
– Country Risk / sovereign risk ( for instance war) (Stock price falls)
– Firm finding difficulty financing itself ( Stock price Falls)
– Changes in risk for company – a company with a higher risk requires a higher return therefore it needs a higher interest rate to finance itself thus it needs more funds than other firms to operate therefore it is more in debt thus people will anticipate firm to be weak thus stock price falls
-Changes in future or current Market interest rates
Future or Current market interest rates are calculated from the yield of bonds these are the interest a country takes to borrow from the public (people) now these yields fluctuate to like stock prices and these fluctuate according to the present economic situation now when the expectations of interest rates for future borrowing rise , stock prices fall if people anticipate that this will be permanent and not temporary the market will always behave on how the people interpret the news and believe how much credit worthy it is
