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In order for the stock "price" to move, somebody sold. Stocks don't reprice without transactions.
by ethbr0 3y ago
In order for the stock "price" to move, somebody sold.
Stocks don't reprice without transactions.
- bboreham 3y agoThe quoted price can and does move without transactions. The last-traded price does not.
- ethbr0 3y agoHow would the quoted price move without transactions? (And I realize we're bleeding over into market making dynamics here)
- bluepizza 3y agoBecause the seller sets a lower boundary for selling, and the buyer sets an upper boundary for buying. There is no price over the counter for individual stocks. The ticker that you see is based on transaction execution, but not on the negotiated price. If there was an overnight discovery of infinite energy supplies, Exxon would wake up to a very different price than the night before, as any potential buyers would severely reduce their upper boundary. Sellers would need to continually lower their price until it finds a willing buyer.
- bboreham 3y agoIt’s entirely up to the entity quoting it. That could be me, for instance, putting a bid into the market because I read a hot tip on HN. Or you may prefer to imagine an automated market-making model that moves its price for Ford because it just saw a big sell-off in GM. Or consider prices at the open each day, which are set before any transactions take place.
- bluepizza 3y agoIf there is a sufficiently impactful information, investors will reassess their valuation and pricing strategies. Company X's stock are worth 100 dollars. A scandal breaks out, revealing that their second most important product must be removed from the market immediately due to health concerns. The company will survive, as it has other products, but it is clear that their income will go down and they will spend a fortune on litigation. Suddenly Investor A wants to sell this stock, because they don't want to hold a risky asset. But who will buy it? Investor B is willing to buy this stock, and will reassess their targets, decide that this stock is now worth around 75, and only buy it at this price. Investor A has two options now: hold a risky asset, or take a loss. If they decide to take a loss, the stock is now priced at 75. If they decide to hold it, then the price might be artificially 100, but this asset is not liquid now, as nobody is willing to buy it at 100. So the price has already dropped, before any transactions happened. See also pre market trading: https://www.investopedia.com/terms/p/premarket.asp https://www.investopedia.com/terms/p/premarket.asp
- CPLX 3y agoIt’s not finite. Shares are trivially created and wealth is trivially destroyed. Consider the example of a company that is founded and immediately issues and sells a million shares for a dollar each, and then burns the dollars in a bonfire. There’s less dollars at the end of the story. It’s not a zero sum game.
- the_mitsuhiko 3y agoThe price can go to zero with no transaction taking place. And commonly does so.
- deleted 3y ago[deleted]