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

Both. Stock prices are reports on the most recent sale of actual shares, so at least two somebodies have decided that the lower price is where they are willing to buy and sell the stock. But that new valuation also affects all the shares that are held but haven’t been traded, as unrealized loses.