Question

Identify 3 factors that affect the value of the stock price. Does the existence of these factors support or refute the efficient market hypothesis?

Answer 1

Factors that affect the value of the stock price:

Major 3 factors affecting the market value of stocks are,

1. Supply and demand of stocks : This is a basic idea, the supply and demand of the stocks affects the stock price. If the buyers are more the stock price will increase and if the sellers are more then the stock price will decrease.

2. Performance(financials) of the company : Supply and demand depends on the how the company performs, the financials(annual and also each quarter) determines that. If the performance is more then the stock becomes valuable to he investors.

3. Economic situation : Stocks are affected by micro and macro economic trends. If the economic trend is at recession then although the company is a good one it is difficult to perform well.

these factors actually supports efficient market hypothesis