Why Stock Prices Fluctuate?

The international stock markets are in continual motion, yet the U.S. stock exchanges do close for most national holidays. Stock exchanges can conduct their service either physically on a trading floor (such as the colourfully vested traders you see screaming at each other on the trading floor of the NASDAQ) or by means of an entirely electronically co-ordinated technique – such as the Australian Stock Exchange (ASX) exactly where brokers interact with the program via a pc interface, and the matching of buyers and sellers is completed automatically by the ASX.

Right here, we observe that the trajectory of the alter in the growth rate of stock prices closely paralleled the announced alterations in dividends anticipated for 2012-Q4, which is what was primarily behind the starting of the recent rally in stock prices.

The stock exchange rectifies this imbalance by collecting and rationalizing all of the buy and sell requests for securities in one, central place – allowing the price tag for each to be entirely industry driven, and thus as close to perfectly effective as achievable.

As soon as investors shift their gaze to a a lot more distant future quarter nonetheless, we can anticipate stock prices to fall sharply, as the expected alter in the growth rate of trailing year dividends per share for 2013-Q3 and 2013-Q4 are each deeply damaging.

Previously, we revealed that adjustments in the growth rate of stock prices closely adhere to modifications in the expected growth price of their underlying dividends per share at distinct points of time in the future, or as we often describe it, the point in the future where investors are focusing their interest in setting stock prices these days.