What Is Stock Market Volatility?

Stock price fluctuation refers to the change pattern of the stock price, which manifests as the fluctuation state of the opposite small trend movement in the large trend. There are three main trends in stock price volatility: upward trend volatility, downward trend volatility, and no trend volatility.

Stock price fluctuation

The main reason for stock price fluctuations is the change in the supply and demand of stocks. The factors that change the supply and demand of stocks mainly come from the following aspects:

1. Political factors

Political factors refer to domestic and foreign political activities that are sufficient to affect stock price changes, as well as the formulation and changes of government policies, measures, and laws on the development of the stock market.

1) War. The impact of the war on the stock market is huge. The impact of war on stock prices depends on the nature of the war, the outcome, and the economic impact on the world or local area. The outcome of the war will also affect investor confidence, which will cause the stock price to rise or fall, causing the entire stock market to oscillate.

2) Regime. Whether the political situation is stable, the transfer or transition of power, the replacement of leaders, the behavior of the government, and the stability of the society will all affect the public's investment confidence. Investor confidence is an important factor in determining stock prices.

3) Government policies. The government's socio-economic development plan, economic policies, especially fiscal policies, monetary policies, industrial development policies, trade policies, and the formulation and changes of stock market development policies will all affect the changes in stock prices. The issuance of some stock market development laws and regulations will also affect the changes in stock prices.

2. Economic factors

1) Economic growth and economic prosperity cycle. The increase in national income reflects the comprehensive level of a country's economic development and growth over a period of time. It is expected that national income will increase or decrease, and the growth rate of national income is an important factor that affects the rise or fall of stock prices, and the economic cycle affects the cyclical fluctuations of stock prices.

2) Price. There is no direct link between prices and stock prices. Generally speaking, rising prices will cause the stock price to have an upward trend. This is because during the inflation period, as the interest rate of bank deposits is often lower than the inflation rate, for investors holding cash, deposits are no different from currency depreciation, which will inevitably shift savings to other objects that can maintain value. So investors buying stocks will increase accordingly. Nevertheless, the relationship between rising prices and rising stock prices is not very obvious. During the period of inflation, the profits of some listed companies will increase, but some listed companies that have been severely affected by inflation will have their profits increased or the profits will be affected. As a result, their profits will fall or losses will cause their share prices to fall. In addition, During the period of inflation, the government will adopt methods such as raising interest rates and establishing a value-added subsidy rate to encourage savings, which will affect the rise in stock prices. In this way, the rise in prices does not have a significant impact on stock prices in the short term. However, the rise in prices will cause the stock price to show an upward trend.

3.Financial factors

1) Interest rate. The interest rate is closely related to the stock price. Generally speaking, interest rates rise, stock prices fall, interest rates fall, and stock prices rise. There is an inverse relationship between interest rates and stock prices.

2) Exchange rate. If the exchange rate rises, that is, the appreciation of the national currency, this is not conducive to exports, but is conducive to imports. Because it increases the difficulty of exporting, it is not good for export-oriented companies, and the stock prices of these companies will fall. If the exchange rate declines, that is, the depreciation of the national currency, it is not conducive to imports, but is conducive to exports. It is also conducive to attracting foreign investment, and is conducive to the economic development of the country, resulting in rising stock prices. However, if the exchange rate fluctuates greatly and fluctuates greatly, it will not be conducive to economic development, and it will also adversely affect the healthy development of the stock market.

3) Credit. When credit expanded, loose money, increased money supply, sufficient upstream capital, and a large amount of idle funds used the stock market as a target for investment or speculation, making the stock market speculative and prosperous, and the stock price continued to rise. When the credit contracted, the money supply tightened and the money supply decreased. Many companies sold stocks in exchange for cash in order to raise funds, which would cause stock market funds to withdraw continuously, resulting in a continuous decline in stock prices.

4) Taxation. The government's taxation of companies and taxation of stock transactions will affect the willingness of stock investors to buy and sell stocks, and thus the price of stocks. When the government raises taxes on listed companies, the taxes paid by listed companies increase and profits decrease; when the government levies taxes on stock transactions, it reduces the investor s income from investing in stocks, which affects investors willingness to invest in stocks. , The stock price will fall; otherwise, the stock price will rise.

4. Corporate factors

The performance of the company is directly proportional to the stock price. Mainly analyze the impact of the company's stock ex-rights and dividends, company capital increase, capital reduction, etc. on the stock price. Corporate factors only affect the stock price changes of a single company.

1) Excluding rights and interests. After a listed company pays dividends in the form of cash or dividends, the stock price is prone to fluctuations. After the ex-rights and ex-dividend of listed companies, the stock price is relatively low, which is easy to stimulate investors to buy; at the same time, the gap of ex-rights and ex-dividends also increases the room for stock prices to rise, and it is easy to induce market speculators to pull up the stock price.

2) Capital increase and rights issue. Listed companies will issue new shares due to business needs to increase capital. After the issuance of new shares, the number of listed companies' equity will increase, which will cause the net value of each share to decline, which will cause the stock price to fall. However, for some outstanding stocks of listed companies with good performance and good financial status, the share price will not only decrease after the capital increase, but will increase because the listed company's capital increase will enhance the company's operating capacity and profitability, which will enable shareholders to obtain More investment income.

3) Capital reduction. When the company announces a capital reduction, that is, to reduce its capital, the total capital of the listed company will also decrease. This is mainly due to the company's strategic needs for business development, or due to the company's poor management. The company needs to reorganize after years of losses. The company's capital reduction will cause the stock price to fluctuate sharply.

4) Stock split. In order to make stocks more attractive, listed companies often split up larger denominated stocks into smaller denominated stocks. The stock split does not affect the capital of the listed company, it only increases the total share capital, but the face value of each share of the stock is subdivided. After the stock split, the net output value per share represented by each share has also decreased, which has caused the stock price to fall, which is conducive for investors to subscribe. For some outstanding stocks and growth stocks, the stock split is more conducive to the rise in the stock price.

5. Market factors

1) Technical strength. In the stock market, technical power is caused by speculative trading activities. Speculators who buy and sell stocks in the stock market are either bullish or bearish about the future trend of the stock price. This bullishness and bearishness naturally form two opposing forces of buying and selling. When people are generally bullish, the buying power is strong, the stock price rises, and the stock market is a bull market. When people are generally bearish, the selling force is strong, the stock price falls, and the stock market is a short market. When the bullish and bearish powers are equal, that is, when the buying and selling forces are evenly matched, the stock price will consolidate and the stock market will consolidate.

2) Human manipulation. In the stock market, artificial manipulation of stock prices is a kind of stock speculation that is difficult to avoid and eliminate. In China's stock market, due to the immature development of the stock market, listed companies have fewer stocks, smaller trading volumes, and incomplete laws and regulations, and weak regulatory authorities, short-term speculation operations. Manipulation is obvious, and stock prices are due to speculators. The man-made manipulation of a person will produce a strong shock.