What Makes a Stock Price Change?

Stock prices vary during the day for many reasons. Prices change because of daily buying and selling by individuals, large institutions, changing market conditions and company announcements. The amount of change is a function of how scarce the stock has become. This is called the float of stock.

Estimates of a Company's Worth

Stock prices attempt to find a price where buyers and sellers are generally in agreement as to a company's worth. Valuations change with changes in interest rates, business conditions and earnings estimates, among many factors. Thus, stock prices will vary with valuation that may be external to the company's control.

Stock Prices are Accurate

Stock prices regularly trade from conditions of overvaluation to undervaluation. Stock prices are determined in a publicly traded market place. These prices may or may not represent the real worth of a company. Prices constantly vary as people try to determine worth.

Bid and Offered Side

Trading stocks depend on market makers who will buy stocks waiting for prices to move higher. This is called the spread between the bid and asked price. Stock prices trade between these two values during the trading day.

Large Institutions Affect Stock Prices

Buy and sell orders from large institutions can cause substantial movements in stock prices. These orders can take several days to complete, and result in increased stock volatility.

Company Annoucements

Stock prices vary as investors attempt to anticipate earnings reports, management changes and industry trends. Large institutions will usually sell company stock when they believe earnings have peaked.

Stock Splits or Buybacks

Varying stock prices are a function of stock splits where the price adjusts for the increase in shares. Stock buybacks increase stock prices as the company retires shares from the open market, thus reducing the float of available stock.