LAP: QS-040

Objectives Explain how stock prices move in the stock market. Discuss causes of stock price fluctuations.

Explain how stock prices move in the stock market. Objective

Stock Prices Can fluctuate in the short termCan fluctuate in the short term Not a concern for long-term investorsNot a concern for long-term investors

How the Stock Market Works ExpectationsExpectations Supply and demandSupply and demand “Bull” and “bear”“Bull” and “bear”

A Stock’s Price What buyers are willing to payWhat buyers are willing to pay Ask price = lowest sell priceAsk price = lowest sell price Buy price = highest buy/bid priceBuy price = highest buy/bid price Some prices are volatile.Some prices are volatile. One Share $2.50 One Share $2.83

Discuss causes of stock price fluctuations. Objective

Stock Price Influences Company Communication Industry Economy World events By category:

Company Influences Earnings projectionsEarnings projections Executive managementExecutive management New productsNew products Business-model changesBusiness-model changes

Communication Influences InvestorsInvestors AnalystsAnalysts IndexesIndexes S&P 500

Industry Influences TrendsTrends  Upward = improvement  Downward = problems CompetitorsCompetitors

Inflation and recessionInflation and recession Cyclical stocksCyclical stocks Economic indicatorsEconomic indicators  GDP  Inflation  Interest rates  Unemployment rates  Federal government’s budget Government actionsGovernment actions Economic Influences

NaturalNatural World Event Influences  Tsunami  Hurricanes PoliticalPolitical  September 11th 9

What’s the difference?What’s the difference?  Earnings  Earnings expectations Should you judge based on expectations?Should you judge based on expectations? Quarterly reports: Are they important to long-term investors?Quarterly reports: Are they important to long-term investors? Hoping for the Best Quick Case

MarkED Acknowledgments Original Developers Christopher C. Burke, Mary C. Hollaway, MarkED Version 1.0 Copyright © 2007 MarkED Resource Center

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