Essay on The Value Of The Company

1125 Words Oct 6th, 2014 5 Pages
Stocks are really very simple. Stocks are basically owning a part of a company in the form of ‘shares’. The value of the shares go up or down depending on how people view the value of the company. If people think the company is worth more, they will sell their shares for a higher price (which causes the price to go up), and if they think it is worth less, they will sell at a cheapest price (which forces the stock price down). This over- or under-valuation of a company is the cause of many ‘bubbles’ that the newscasters often talks about. Paula Byron researched this phenomenon and found that “when [scientists] simulated market conditions for groups of investors, economic bubbles – in which the price of something could differ greatly from its actual value – invariably formed” (Byron, 2014, para. 2). Scientists found that these bubbles are not necessarily the fault of the media, or even the company itself, but rather the traders’ mental view of the value of the company.
Regardless of whose fault the bubbles are, stocks are very important to the economics of today 's society. They are seen as a reflection the fundamentals of a company. As Investopedia puts it, “the price of a company 's shares is often used as an indication of the overall strength and health of a company” (Lee, 2009, para. 2). Stocks fuel small businesses, support businesses hitting hard times, and fund the future plans of big businesses. And, if investors play them right, the stocks could make them a nice…

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