What drives share prices? Analysis of factors affecting the stock market. Article 1 of a series of articles

What drives share prices? Analysis of factors affecting the stock market. Article 1 of a series of articles

A question that interests every new trader or investor, but also a question that often gives sleep to even the best hedge fund investors, traders , quantitative and algorithmic developers or top economists. What really moves the price of stocks and indices up and down?

There are hundreds to thousands of parameters/data/information/indicators that influence the share price, from rational to psychological and irrational. But how do you know your way around the sea of information? Which information is important, which is less and which is irrelevant? How to follow only the most important ones and how to leave out the less important ones so that we don’t go crazy or get swallowed by an unnecessary amount of information? And which data do institutional investors and traders follow most often? A series of our articles will be about all this.

It is also important to remember that we have different types of actions /companies, e.g. growth technological, defensive, cyclical, etc. Each of these companies behaves differently and also behaves differently in other periods of the economic cycle (while in growth periods it is more appropriate to invest in growth technology companies, in periods of corrections and impending recession it is usually more appropriate to anchor in safer harbors such as stable defensive stocks , gold, bonds). Also, some parameters such as the p/e ratio are more important for conservative investment companies (such as banks, railways, companies and beverages) which do not make as significant growth/ gains as growth companies, but are more stable and usually do not make such sharp declines as growth technology companies in which, on the contrary the p/e ratio is not that important and they can grow even by hundreds of percent despite the overheated p/e ratio because they have patents and technologies in reserve that will ensure the company’s rocket growth, expansion and replication of its business in the future. It may seem complicated, but we will explain everything simply and in detail in our series of articles.

In the introductory article, we will talk about What drives the share price? Analysis of factors affecting the stock market, what are the basic data that move the price of shares. What are the Macroeconomic factors that are specifically important and have a stronger/significant influence on the share price, to what extent do they influence the share price according to many investors and traders . We will explain what are sector factors and factors of the company itself, from economic data from accounting and quarterly reports to other fundamental data, news , data, patents, sentiment .

This article is an introductory and simple introduction to the overview of the factors that affect the price of the share, we recommend the whole series of articles.

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