4. Why and howdo stock prices rise or fall? Explain in one clearly written paragraph for...
4. Why and howdo stock prices rise or fall? Explain in one clearly written paragraph for each of the parts A, B, and C below.
4A. Explain based on the views of the Chartists or Technical security analysts.
4B. Explain based on the efficient market hypothesis EMH.
4C. Explain based on the psychology and emotional factors.
Homework Answers
4A. Stocks prices rise or fall based on chartists or technical security analysts because There are certain levels which are technical in nature like 200 days DEMA or 200 week DEMA, On crossing those levels on ther upside or downside , stocks gathers momentum and there is serious movements. Normal movements in markets are based on the volume and open interest.
4B. Efficient Market Hypothesis reflects that all past publicly informations are already been discounted in the price of a stock so stocks reacts on the upside or downside based upon new price sensitive informations. So, New informations are the key to movements in the price of a stock on the either side.
4C.Stock price rise or fall based upon the sentiments and emotional factors. When there is a good news , the sentiment becomes positive and investors rush to buy stocks and when sentiments go negative, investors rush in to offload their stocks causing an irrational downmove.
SO, Fear and Greed factors are also responsible for causing movements in the price of a stock.
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