When a stock price goes down, is it that many people have sold and now have that value in cash OR is it that the market just decides the stock price is now worth less collectively?

Question

When a stock price goes down, is it that many people have sold and now have that value in cash OR is it that the market just decides the stock price is now worth less collectively?

In: 103

Answer 1

In its simplest form, it comes down to supply and demand.

In a liquid market if there are more demand from buyers than sellers, then the price needs to go up to meet the demand. Same holds true if there is more demand from sellers than buyers.