What is the clientele effect?
The effect of clientele is the theory that focuses on moving stock prices when they relate to specific options. This particular concept claims that the movement of these prices up and down occurs due to investors' responses to specific events that affect the goals and requirements of these investors. Some of the events that may cause changes in the way investors perceive the stock option involves the implementation of tax, changes in the way they are paid dividends, or any other type of policy change that affects the activities of the company issuing securities.
The basic prerequisite for the clientele is that any type of event considered negative investors will lead them to withdraw support from the option and the issuing company. After taking this support, investors will be able to find some other way to invest your money. This often leads to investors to decide to direct their interest in similarity that does not seem to be burdened with the samefor negative events. As a result, the demand for options reduces and the market price begins to fall.
At the same time, the effect of clientele can be positive. For example, if a company changes dividend policy, such as moving dividend payouts that investors perceive as positive, the degree of support is likely to increase. In this scenario, investors are likely to gain additional shares more often and also recommend the possibility of other investors. The final result of this type of clientele effect is that the issuing company generates another registered capital, strengthens its position on the market and eventually earns more money for all participants.
It is important to realize that the presentation of any changes in politics has a lot in common as these changes perceive these changes. This is a situation where a company that would like to reduce dividend would have to persuade investors, PRWhat is this step in their best interest in the long run. If the company is able to minimize the impact of policy change and truly motivate investors to see a shift in a positive light, it is likely to decide to maintain their shares and maybe buy other options. If the company could not spin this change in a way that investors consider to be a step forward, then the effect of the clientele is likely to be a significant number of shares ejected to the market, which will launch the price drop.