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What makes the prices of shares epileptic

Updated on September 28, 2010

One of the common features of the Stock Exchange Market is the upward and downward movement of share prices. This though is not without control. The upward and downward movement of prices of shares of a particular company on a trading day must not go beyond 5% of its opening price on the day in question. Meanwhile, this daily rise and fall in the prices of shares can be attributable to the following factors:

Company’s performance: Whether a company is doing well or not financially will have either a positive or negative effect on the prices of its shares as the case may be.

Innovation: New things like products, services, technology, management, information, etc are always a major reason for price movement in the Stock Exchange Market. The movement will depend on whether it is positive or negative.

Economic or Political Stability: Economic and political data such as inflation rate, interest rate, government policies, return on investment, presence or absence of crisis all affect the prices of securities in the Stock Exchange Market.

Management/Director’s holding: Large participation of ownership by top management and directors is good as it depicts some level of dedication and also affects the prices of shares.

Demand and supply: In any market, the major determinant of the price of any commodity is the forces of demand and supply. This is not without effect in the Stock Market. Prices go up when demands are high and vice versa.

Presence or absence of institutional investors: These are big investors who have the ability to buy very large volume of shares overtime. Their presence or absence therefore will have serious effect on the price of the securities in the Stock Exchange Market.

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