Announcement & Share Price

Announcement & Share Price

Introduction

The movement in stock price is due to the variation in demand and supply of the shares. If investors eagerly looking for company' stock, market price of the share will increased. Similarly, if investors want to sell company's shares, then the market price of that share will reduce. The demand and supply relationship is attached to different news reports issued at any specific circumstance. In this essay, the focus of the discussion would be Impact of new information announcement on the company share price.

Discussion

News, either good or bad affect share prices, no matter if the investor is long term or short term, it is essential for each investors to keep track on the news related to the company they have made an investment.

Share Price

Share price is the price of a single share of the company stock trading in the market. As soon as stock is purchased by the investors, they become shareholders of the company. The price of share is determined through market capitalization via the total number outstanding shares. Increase and decrease in share prices depends on the market forces i.e. demand and supply of share. These shares are traded on Stock exchange (Boudoukh, Feldman, Kogan, Richardson, 2011).

Stock Exchange

Stock exchange is a platform where securities are bought and sold. This is market where bonds, stocks and notes are traded. This market is further divided into primary and secondary market. Primary market in which corporation, municipalities, government and other incorporated bodies raised capital through channelizing investors saving into the useful ventures. Secondary market, where investors sell their existing securities/stocks in order to earn profit or for reducing uncertainly. New York Stock Exchange - NYSE, London Stock Exchange - LSE and the Tokyo Stock Exchange - TSE are the largest stock exchange in the world (Cornell, 2012).

Types of Stock Markets

In finance, there is a concept of Efficient Market Hypothesis which state that financial markets are informationally efficient. This theory origin is from Stock market as it indicates how markets tend to work with respect to any published information. Considering this, there are three version of market weak, semi-strong and strong (Mcgraw-hill, 2012).

Weak Market

Weak market refers to market in which one is unable to forecast future prices of shares based on past prices of shares. In short, when previous stock prices trend does not assist in predicting future prices, then it is useless to observe them. For instance, recent studies that has tested more than 5000 technical analysis rules, illustrated unsuccessful for generating ab-normally greater returns.

Semi-Strong Market

In this market, one is unable to utilize any published information in order to forecast future stock prices. Semi-Strong Market attempted for fundamental analysis. If entire information that has been publish reflected in a share price then it is useless to look at financial statements of the company or request information from the fund manager. Semi Strong market never emerges to be ironclad, therefore, as there are few small investors such ...