How are prices of stocks determined on a daily basis?

Question

Why is Google’s stock priced at 129$ and Microsoft at 322$ for example?

In: 6

Answer 1

The “price” of a stock is just the price where the number of people willing to _sell_ at a given price is equal to the number of people willing to _buy_ at a given price. The exchanges facilitate those transactions, but it is the individual buyers and sellers that determine the price organically.

So, for example, lets say you own some XYZ corp stock and you want to sell it for $100. Problem is, no one is willing to buy it for $100 – they tell you they will only pay $80 for it. Fine, you say, I’ll sell it to you for $80 – $80 is now the price of the stock.

Now, how you determine what you are willing to buy/sell the stock for is a very complex answer involving multiple valuation techniques, each potentially producing different answers based on what assumption you put into your model. This is why prices fluctuate over time – new information and new assumptions are constantly being made, each impacting what particular buyers and sellers are willing to price their shares at.