WHAT IS AN IPO
- Initial Public Offering -
2. What affects the Shares market?
The marketplace determines share prices. While the supply and demand meet in the market, there is no defined equation that permit investors know exactly how share prices will behave. However, there are some factors which cause the move of the stocks up and down.
► Demand and supply
Demand and supply in the market define the price of a particular stock. When demand for shares is higher than supply, meaning that there are more buyers than sellers, the price goes up. On the other hand, when demand is less than supply, meaning that buyers are less than sellers, the price decreases.
► Interest rates
If the interest rates are low, demand for funds is higher and subsequently demand for shares goes up. On the other hand, high interest decrease the demand for funds and the demand for shares goes down.
Market players have an impact on share prices. With more bulls than bears, the prices increase. With more bears than bulls, share prices decline.
Dividends indicate share price movements. When companies make the announcements of dividend, the share prices of a certain company is likely to increase. Let’s emphasize that if the dividend rate announced is lower than the investors' expectations, share prices decline. If they are higher than expected, share prices increase.
3. How does the shares market work?
The majority of stocks are traded on exchanges, which serves as a crossing road for buyers and sellers to decide on a price. Some stock exchanges are physical locations where both parties meet and decide on a price. You have crossed at least one picture of a trading floor, in which traders are wildly throwing their arms up, waving, yelling, and signaling to each other. The other type of stock exchange is virtual, made of a network of computers where traders, the platforms are made electronically.
The aim of a stock market is to make stock trading easier for traders. First, let’s make clear that there are two markets: the primary and secondary markets. The primary market is where securities are created. It is the market where companies sell new stocks to the public for the first time.
The secondary market is where traders buy and sell securities they already own. It is what most people think as the “stock market”.
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