Factors That Determine the Price of a Stock in the Market

Author: George Davis

Stock market prices depend on several external and internal factors. If you understand how these factors influence the prices in the stock market, you can make a better and stronger investment portfolio.

If you are new to the stock market, you are probably wondering “why share prices keep changing?” This is a common question beginner-level investors ask before they start investing in the stock market.

The factors that determine the price of a stock in the market are an interesting topic. While there is no one-size-fits-all answer to how share prices change, investors need to know what factors they can control and which factors they cannot control to maximize their investment. In this blog post, we will discuss factors that influence the stock market and how share prices change.

Factors That Change Stock Market Prices

When the stock market goes up, its good news for some and bad news for others.

The changing share prices can depend on several factors that can affect a company’s value, like earnings per share (EPS), revenue growth, and net income ratio (NIR). Other uncontrollable factors, like the supply of goods vs. demand, also play a role in how shares go through sudden price changes.

Internal Factors

Certain factors are out of investors’ control. However, investors can control some factors to maximize their investment opportunities when it comes to stocks.

1. Supply and Demand

The factors that an investor has control over, include the supply and demand of a stock. For example, if there is high demand for a particular company’s product, it may cause its share price to rise as investors want in on this growth trend. However, when the supply for shares rises but not enough people demand them, their prices will fall.

2. Revenue Growth

Another factor that can change a company’s share prices is revenue growth. Revenue growth refers to “the increase in revenues over time.” It includes factors like gross domestic product (GDP) and other factors, such as population and unemployment rates. GDP is included in revenue growth, because larger GDP figures indicate more employed people receiving higher wages and an increased demand or flow of money from one sector to another. In this way, revenue increases exponentially across sectors, resulting in increased total net income and high stock prices on Wall Street.

External Factors

Factors outside a company’s control, like natural disasters and government regulations, are categorized as external factors.

1. Natural Disaster

Natural disasters reduce the stock market price drastically, because companies incur heavy losses when they are affected by them. If a company loses all its valuable data after a flood or an earthquake, resuming operations quickly can become a challenge. This inability to resume operations can cause a panic in the stock market, causing investors to sell their shares, which leads to a stock market crash.

2. Current Events

Political events, terrorist attacks, civil wars, and riots also affect the stock market. When a country is under distress, businesses tend to lose productivity, which reflects on their balance sheet. Decreased productivity and weak performance cause stock prices to drop since buying and selling activities come to a dead stop.


Besides the factors mentioned above, the stock market price can fluctuate for several other reasons. These reasons include interest rate, inflation, and other political events that reduce the purchasing power of retail investors. Nevertheless, stock activities continue despite tough circumstances, because it offer investors a quick way to increase their wealth.

Stock Picks

1. Reliance Steel & Aluminum Co. (RS)

2. Realogy Holdings Corp. (RLGY)

3. Citizens Community Bancorp, Inc (CZWI)

Find the top stock picks with guidance on when to sell, buy and further information by subscribing to the PT Premium Service in the Proficient Trader App