Fundamentally, why does a the share price change?
It is obvious that an increase in demand for a share increases it's price provided the number of shares remains constant. However what I am actually asking is why the share prices actually change (i.e the market prices). Is it driven by people who sell there shares for a minimum price that they enter manually? More my fascination with this is when most people use online trading platforms where you can simply press buy and sell and it will automatically find the best price, surely the price of a stock is determined by the average current price people are selling there shares for, at a price they enter manually.
Supply = Volume of Shares on Offer
Demand = Volume of Shares being Bid on
Price = Average Price where Supply crosses Demand
If supply > demand and price of S/D crosses are significantly lower than current price, price falls
If demand > supply and price of S/D crosses are significantly higher than current price, price rises
How much the price moves depends on how much volume is being traded that day. More liquid stocks = higher volumes = more price movement, less liquid stocks = lower volumes = less price movement. Caveat being that even if prices move less (lower volumes) in illiquid stocks they can move extremely (higher volatility) widely if someone comes in with size.
Participants can range from AM houses entering in / exiting / resizing a stock, HFs going long / short / covering a short / starting an activist campaign, market makers providing liquidity, insiders liquidating some of their holdings, underwriters unwinding their exposures, derivatives writers delivering on their obligations, corporates buying back stock, retail scalpers coming in / out, retail whales loading up on stock / exiting / shorting etc. All of this happens concurrently and will be reflected in volumes, ownership tables, S /D differentials etc.
This. So many people yell "Why is XYZ stock going up?? The fundamentals aren't changing!!!" Well, it's really only because of the demand > supply. "Fundamental valuation" is only a model that helps us understand supply and demand, it by no means determines it.
Bid/Ask
It's called the bid-ask spread. Market makers quote an ask price (the price you buy at) and a bid price (the price you sell at). Changes in supply and demand lead to them changing their quoted prices for the bid and the ask.
market price is driven by supply and demand. fundamental (real) price changes when the value of the company changes which happens due to NPV of projects the company undertakes. for example, if the company decides to launch a new product, the stock price will change by NPV/#shares.
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