3 Factors Affecting Stock Prices
That You Don’t Know

Factors Affecting Stock Prices
Unconventional Reasons Why Share Prices Change
Undoubtedly, there are so many factors affecting stock prices. Unfortunately, many novice investors are concentrating too much attention on the external factors. They didn’t notice the importance of account engineering effect.

When it happens, they feel cheated and get mad why it happens that way. Let see what the factors are and how it affects you,

Dividend Effect

I love dividend as much as you do, but apparently, it does not comes for free. Instead, it comes with a price tag. Look, Investors, who own the stocks have the same thinking as you do, to sell the stock right after they got the pay check.

Therefore, the stock price will drops in the same value as the dividend paid right after the ex-date eventually. This can happen because they are investors who want to receive the dividends but have no plan to hold the stock any further.

For instance, if GE decided to distribute $1 per share as dividend to its shareholders, its share price will generally drops from $55 to $54 per share right after the ex-date.

Bonus Issue

Bonus issues are additional shares distributed by the company to its shareholders. The advantage is that, the company able to reinvest the dividend cash for better earnings growth while awarding their loyal shareholders.

In fact, this is the best way to maintain its stock price at cheaper cost without splitting the stocks. And if the stock is cheaper, its trading volume can be sustained as more private traders can afford to buy and sell the stocks.

Theoretically, the stock prices will fall with the same ratio of bonus issued. For instance, if the stock decided to give one new share for every four shares own by the shareholders, the stock price will drop by 20 per cent.

Warrants Exercise

Warrants give you the right to buy shares from a company after the exercise date at pre-determined price. As a result, its earnings will be diluted as more shares are sharing the same profits pie. In general, the stock price will drops with the same proportion of the number of exercised shares.

For example, if the exercised share is 20 per cent of the existing number of shares, the stock price will normally drops by 20 per cent as well.
Unlike stock split, these factors affecting stock prices by diluting the earnings per share (EPS) of the stock, which in turn will adjust its stock price accordingly.

Although long term investors do not care much about it, stock traders (esp. swing and day traders) should consider these factors seriously. Overlook these factors can cause you the same losses as mentioned above.

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