I just don’t understand how it works…when I hold shares in a company and I spend money there, am I technically making a very very small amount of that money back?
ALSO:
what is the simplest way to explain how stock prices increase then?
In: Economics
There’s not a direct connection between the company’s revenue and its stock price. The stock price reflects what people think the company is worth, which is in part based on its revenue. So by spending money the company has higher revenues and that could cause people to value the company more making its stock more expensive. So in an indirect way, yes. But it’s not a sure thing. Amazon historically had high stock prices despite losing money because investors believed in its potential. Companies without foreseeable growth might have high revenues but a relatively low stock price. ETA: Also if they pay a dividend, you’d technically be getting back part of their revenues.
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