Factors That Affect Stock Prices

Factors That Affect Stock Prices
••• business charts with buy image by Andrew Brown from Fotolia.com

Stock prices are affected by many factors that can cause the value of the stock to rise or fall. The fluctuation in stock prices ultimately affects the buying and selling of stocks. Some factors that affect stock prices include world news, company news, market sentiment, supply and demand, company earnings, company mergers or takeover and dividends.

Market Sentiment

Public sentiment regarding the stock market can cause the market to either go up or down and consequently that can result in the rise or fall of stock prices. The direction that the stock market takes affects the value of the stock. When the market is a bull market that means that there is investor confidence and stock prices are expected to rise.However, during a bear market session there is negative market sentiment and a lack of investor confidence. Stock prices generally rise during bull market periods and fall during bear market periods.


The news can have either a negative or positive effect on the prices of stock. National news, world news and company news all affect stock prices. Bad news can cause stock prices to drop significantly while good news may either have no effect or result in a small to large rise in stock prices. Fear, insecurity and doubt can come as a result of negative news stories about global recession, economic crisis and even national security. These elements can have a negative effect on investor confidence in the stock market causing stock prices to fall. Negative press about a company can lower the value of the stock causing the stock prices to fall. Likewise good news about a company can lead to added interest in company shares, increasing the value and this can result in a rise of stock prices.

Industry Conditions

Conditions in the industry related to the stock can either negatively or positively affect the price of the stock. It all depends on the type of sector or industry the stock is in since some sectors are prone to a cycle that can lead to higher selling prices or lower selling prices. Even the popularity of a certain sector can affect the price of the stock because the price and the value are directly related. Higher valued stocks have a higher price than lower valued stocks. For instance technology stock commonly known as blue stock is one of the most popular types of stock to invest in because the technology industry is vibrant and becoming increasingly stronger. Consequently the prices of this type of stock is higher than stocks in other industries experiencing a downturn.