Generate Value

Who decides the value of a particular Company's Share?

The daily fluctuation in the value of a share is purely because of the investors bidding trend or the return? If return how the returns are calculated per day? Are companies honest and so fast in filing their returns?

Public Comments

1. Yes investors which we refer to as the Market.
2. The market determines the price, i.e. the price is determined by what a willing buyer is willing to pay and what a willing seller is willing to sell for.
3. A company's share price depends on demand/supply. So this is why bad companies can have many buyers and good companies do not. Earnings and cashflows of a company influences the demand and supply schedule.
4. Bidding trend is normally a result of the share price, not the other way around. But there is an effect called momentum that is purely psychological. People expect the prices to continue in the current path. A fair assumption but is usually wrong, and especially wrong when you're the one holding the bag. The return on investment such as growth or yield also has an effect. Some investors extrapolate the future price of a stock by accounting for the added revenues in a report. Companies only file earnings reports 4 times a year. But what causes daily fluctuations is "noise" that usually comes from day to day news and current events that may or may not have an impact on the stock in question. The price will fluctuate in response to new headlines because the trader will try to calculate the impact of say "Poor weather on the health of Soybeans" and make a prediction on whether or not the impact is significant. He will then make his bet depending on his calculation of possible risk/reward. However much the stock price goes up is how much more he's willing to pay for the security and vice versa.