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Explain causes of stock price fluctuations. Where Did the Terms Come From? The bear and bull markets are named after the way in which each animal attacks.

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Presentation on theme: "Explain causes of stock price fluctuations. Where Did the Terms Come From? The bear and bull markets are named after the way in which each animal attacks."— Presentation transcript:

1 Explain causes of stock price fluctuations

2 Where Did the Terms Come From? The bear and bull markets are named after the way in which each animal attacks its victims. It is characteristic of the bull to drive its horns up into the air, while a bear, on the other hand, like the market that bears its name, will swipe its paws downward upon its unfortunate prey. Furthermore, bears and bulls were literally once fierce opponents when it was popular to put bulls and bears into the arena for a fight match. Matches using bulls and bears (whether together or gains other animals) took place in the Elizabethan era in London and were also a popular spectator sport in ancient Rome

3 Difference between a stock’s buy price and ask price A two-way price quotation that indicates the best price at which a security can be sold and bought at a given point in time. The bid price represents the maximum price that a buyer or buyers are willing to pay for a security. The ask price represents the minimum price that a seller or sellers are willing to receive for the security. A trade or transaction occurs when the buyer and seller agree on a price for the security The difference between the bid and asked prices, or the spread, is a key indicator of the liquidity of the asset - generally speaking, the smaller the spread, the better the liquidity

4 Volatility In other words, volatility refers to the amount of uncertainty or risk about the size of changes in a security's value. A higher volatility means that a security's value can potentially be spread out over a larger range of values. This means that the price of the security can change dramatically over a short time period in either direction. A lower volatility means that a security's value does not fluctuate dramatically, but changes in value at a steady pace over a period of time.

5 What Are Bear and Bull Markets Simply put, a bull market refers to a market that is on the rise. It is typified by a sustained increase in market share prices. In such times, investors have faith that the uptrend will continue in the long term. Typically, the country's economy is strong and employment levels are high. On the other hand, a bear market is one that is in decline. Share prices are continuously dropping, resulting in a downward trend that investors believe will continue in the long run, which, in turn, perpetuates the spiral. During a bear market, the economy will typically slow down and unemployment will rise as companies begin laying off workers

6 Describe how company-specific changes affect stock price Management New products or services Company profile (e.g., mergers, acquisitions, splits, expansions)

7 Describe how outside forces affect a company’s stock price Changes in supply or demand (e.g., increased competition and availability of substitutes) Economic conditions (e.g., inflation, recession, bull and bear markets, economic indicators) Government action (e.g., interest rate, pending legislation)

8 Performance Activity Students will learn that economic news and business events can change the price of a stock. They will see that the unexpected events that benefit or harm the company will in turn move the company’s stock price up or down. Certain internal and external factors will affect share prices. By learning about the relationship between business events and share prices, students will be able to form a strategy in buying and selling stocks for the classroom stock game and final project. A number of factors influence stock prices. Some internal factors include Earnings growth Sales growth Product release Leadership changes Lawsuits pending A number of external factors change the share prices: New market competition Economic news such as interest rates and inflation Government policy changes News and Publications

9 Performance Activity Research and locate articles that support the internal and external changes (positive and negative) that impact stock prices. Create a detailed presentation that describes how these factors impact stock prices and give specific examples of companies’ whose stock was impacted both positively and negatively.


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