As I understand it, when people buy a share of stock, the price goes up. When people sell it, the price goes down. So what does this have to do with the company itself that this stock represents? For example, if a bunch of people wanted to make Apple’s stock price go down, they could just agree to sell their shares. So what does the actual stock price have to do with the company?
In: 5
The stock price is a representation of what investors believe the company is worth.
People buying and selling stock will influence the price. This is the basis of supply and demand. I think the part you’re missing is that for a single stock there could be millions of trades (a buy and sell pair) per day. With so many investors buying and selling the stock, a price range develops around where investors believe the fair price to be.
Typically, stocks will not move from the established price range unless there’s some new information that causes many investors to change their valuation of the company. For example, if apple announces they sold more iphones than expected, then their stock price will rise. Other news is more ambiguous like if apple spends billions investing in VR. Some investors will consider it a positive and purchase stock, while others may see it as a negative and sell their positions. A new range will be established based on the majority of investor sentiment.
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