Once stocks are on the market, which best explains how their prices are set?

Once stocks are on the market, which best explains how their prices are set?

a. prices are controlled by the issuing company

b. prices are set by the financial market

c. prices follow economic trends

d. prices fluctuate on the basis of demand

Answer: d. prices fluctuate on the basis of demand

The general movement of stock prices particularly in the secondary market is basically influenced by supply and demand forces. Having issued shares in IPO, therefore, the value of such shares is no longer a matter that the company sets from point to point. Rather, it bears the relative volatility definition and varies depending on investors’ appetite for the stock. Such elements include; past and future earnings of the company, industry peers, the general economic environment, and investor perception. If there are more buyers for a particular stock than the number of sellers, it will normally push up its price. On the other hand, the price often tends to drop when more investors are willing to sell compared to the number of those wishing to buy the commodity. Thus, by this dynamic and demand-driven mechanism, stock prices are incessantly realigning themselves to the demographic evaluation of corporate value and potentiality.