A stock price is the price of a single unit of a stock, the price of a single unit of shares of a company, or is the highest amount someone is willing to pay for a stock or the lowest amount that can be paid to buy a stock. Stock prices are never stable; they fluctuate from time to time because of the prevalent market forces. Though the price of a stock cannot rise or fall for more than 5% in 24 hours in the stock market. There are several factors that determine the price of a stock in the stock market.
Company’s financial performance: each company quoted in stock market are mandated to present their quarterly result to the stock exchange for clearance and each company is required to publish its quarterly result to the public, the performance of a company presented in each quarterly result play a very important role in determining price of their stocks in the stock market , a good performance will attract investors, bring more buying ,and this factor combined with other condition will push up the stock price in the stock market, while a poor performance will shun away investors, create more dumping of the stock and this will bring down the stock price of the company affected.why to invest in stocks
The power of demand and supply: the higher the demand the higher the stock price, the higher the supply the lower the price, when much investors are attracted to a particular stock, the demand for that particular stock goes high and consequently the stock’s price goes high, when a quarterly performance of a company is good, shareholders will retain their share in order to benefit from the trend; meaning, less dumping of the shares and low supply to capital market , whereas other investors will be interested in the stock, meaning ,high demand. Therefore if the forces of high demand and low supply combined definitely there must be an increase in the stock price.
On the other hand if the quarterly performance of a company is poor, more shareholders will begin to dump their shares, meaning more supply to the market whereas investors will be scared away from such stock resulting to low demand of that stock, if more stock are coming into the stock market and there are no buyers to buy, there will be a high supply and this will result to a sharp drop of a stock price.
The influence of return on investment factor: companies with good return on investment will have a large patronage of their stocks. And this will lead to increase in their stock value.
The influence of government policies: a favorable government policy will bring positive effect on the stock market, for example, in the Nigeria, the deregulation of the oil sector, attract more investors and this led to upsurge in the sector and also the ban on cement importation led to increase in cement price and this add values to stock prices.stock exchange review
Political environment: when the environment is peaceful, the economy will be stable, foreign investors will be attracted to the stock market and this means money to the capital market and this will shut up the stock prices, but when the environment is not peaceful shareholders will dump their share and run with their money in case of any eventualities, and this will shut down stock prices.
The interest rate factor; a high interest rate will send away people from capital market to the financial market and this means more dumping of stocks.