Eli5: when somebody dumps a million dollars into a stock why does the price not temporarily skyrocket?

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In: Economics

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Anonymous 0 Comments

A million dollar stock purchase of a company worth billions isn’t really that much. It likely happens every day with purchases by various hedge funds, institutional investors, etc.

But what can happen, is the price of a stock can increase when a high profile investor purchases shares – someone like Warren Buffet for example. However, this is likely more due to the fact that Buffet investing in a company can be seen as a sign that if he thinks it’s worth investing in a company, there must be something good about. Even then, it’s probably less about the actual purchase of shares.

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