SHARETIPSINFO >> Articles Directory >>Why Stocks Are Way Too Pricey
Like any other commodity in the market, the price of the stock also depends on the demand and supply of the stock. It is that basic principle of economics that primarily drives the stock prices. If the demand of a stock is high among the investors the price of that particular stock rises at the market. On the other hand if there is less or no demand for a stock the price of that stock goes down. It is very simple till this point. But what is complex t understand is complex to understand is the factors that create the demand for the stock and cause the rise in the price. As an investor you have to understand what makes people to like a stock and dislike another. There are so many factors that create demand for a particular stock.
If the company is fundamentally strong that means if the company have made good profit over the years and posted high earnings for the last few years, it is quite likely that the price of that stock will go up. There are of course other fundamental factors like assets, debts and other that give a clear idea of the financial position of the company and if all these factors look good, demand and price of that stock rises at the market.
There are times when there is certain news about the company that hint at huge profit of the company in the near future. It may be either a good prospect of the sector as a whole or the company itself. In these situations as well the price of the stock rises unexpectedly.
If there is possibility of merger or acquisition of a small company by a large enterprise then price of both of the companies go up. Especially the price of the small company rises beyond the level.
These are the specific reasons that make the price of the stocks go up. Then of course there is the overall market trend that increase price of the stocks significantly. In fact when the market is rising and there is a common sense of optimism about the market among the investors and they invest in the stocks without any worry. The result is huge demand of the stocks and multiple rises in the price level of the stocks. During the rising phase of the market almost all the stocks in the market see rise in the price level and most of the stocks become overpriced in the bull phase.
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