A question that i've never been able to find an answer to, and something i've never understood about the stock exchanges and such... who actually decides how much a share in a company is worth??

Say some american politician has some sex scandal break (as if..!!!) and it's heavily connected to wal-mart due to the fact that the scandal involved their own brand mayonnaise. Now this caused a lot of concern over the future of Wal-mart on the nasdaq or wherever it's listed, assuming it even is. so people start selling shares and by the end of the day 15% is wiped off the face of wal-mart's share price.

Obviously there is a large amount of supply and demand and other market forces, but these forces are actually controlled and reacted upon by real human people, and when i get bored an watch Bloomberg on satellite TV for 10 minutes i see people in funny colour suits crying in the corner of a room in wall street... now they buy and sell based on what the boards list the prices at, that's fine, but who actually directly says "hey, dave, take another $12 off of wal-mart will you?" in order to make that guy on the trading floor cry?

or am i really totally missing something? These numbers literally vcan't just change themselves, unless it's the midi-chlorians.

I believe that you already answered your own question. The fat-cats on Wall Street pretty much have every stock in the palm of their hands, and have the will to change the value of stocks, and de-list stocks, as well as hold a huge influence over the US government (they are called lobbyists). Now that there is also the acquisition of the Wall St. Journal by Murdoch, it won't be surprising to see Wall Street being influenced by a political agenda.

It may very well be that simple. The fact that most like to take in so many other things into account. Not to say that there aren't other factors to consider, but it isn't always the case.

A sex scandal involving mayonnaise? Now that sounds a lot more interesting than stocks and shares!

The thing I don't get about the share market is how fickle it is.

People panic over the slightest thing, and it causes stock values to plummet. Then people panic about the stock prices plummeting, and sell all their shares.

Over a longer period of time, rather than just 24 hours or a week or a month (say a year or two), most stocks will increase in value and you will turn a profit. They just go up and down a bit in between.

--Ian

You seriously don't know how the Stock Market works? http://en.wikipedia.org/wiki/Stock_Market#Trading

Bidding and trading occurs, think of a huge auction. Demand drives the price up, when there's no demand, it goes down. Some people use professional stock traders, others now with help of internet do it themselves. Some do physical trading and bidding on open floor even.

Rent the movie Trading Places with Dan Aykroyd and Eddie Murphy, great movie and will give you a good hint on how the market works with a little bit of entertainment. Wall Street is another good one with Charlie Sheen and Michael Douglas. Go watch them now before asking more silly questions.

That's why i'm asking this... people just say "oh.. it's market forces..." which is correct at some level but unless they are referring to a Mr M Forces inparticular, that's really of no use at all...

Market forces drive the price of eggs, but that just means that due to the recent decline in the mayonnaise markets, less eggs are required, meaning the egg sellers have to decide to sell them cheaper to get their profit. If they don't they are left with a shed full of eggs and go bust, and that's all logical. but no one is left with a shed full of shares...

This is how I think it works:
Shareholders are the owners of the egg seller's business. Less demand for eggs means lower prices, lower prices means less profit per sold egg. Less profit means shareholders receive less dividend, which means the egg company has less value to the shareholders. As a consequence the demand for the shares declines, which means the share prices go down. And if the egg seller goes bust, he is laughing his head of because the real owners are the shareholders: they are left with a shed full of eggs, not him.

Well, that's the way I look at it anyway. Or am I wrong?

well that makes sense at the level described, but how is the jump made from demand going down to the price going down? why isn't it the case that the company says "no, i think that news story is rubbish, it was actually salad cream he used, leave the prices where they are please." obviously that's not possible, but it's not possible because there's an alternative...

I don't think companies can change the price directly, since the company is owned by shareholders. Only the buyers and sellers of shares can exert influence over the price of shares, AFAIK. The company, unless itself a shareholder, can do nothing.

I believe the situation pretty much works as follows: let's say some bidders scream that they'll buy N shares in company X, but for two dollars less than the current asking price. Then there are two possibilities: either the sellers (who want the best price) will say "Yes, that's fine" (prices go down) or they will point and laugh at the bidder (prices don't change).

And what prompts bidders to offer less, and sellers to agree to the lower prices? I think mostly anticipated negative impact on the company's business due to reasons varying from sex scandals to tax fraud, speculation, rumors, etc. That sort of thing anyway, I think.

hmm, ok. so i guess if the price didn't drop then those with shares already would sell them at what would be technically above market rate, thereby losing the company money... i still wonder who that person making the call is though... but that does seem to make more sense. still pretty vague though!

acid_kewpie, run over and read this: http://www.asx.com.au/investor/educa...open_Close.htm

Very interesting. There are obviously going to be variations among markets, but that is how the Australian Securities Exchange does it. While I don't know the details for the U.S. exchanges, I know that they have adjusted things over the years to try to stabilize it against some of the wild swings that have occurred in the past.

Sounds like voodoo doesn't it? Speaking of which, this is quite an interesting read. Especially when the US Dollar was taken off the gold backing. http://en.wikipedia.org/wiki/Voodoo_economics

What is more interesting is how the US affects the whole world. At the moment the US is facing a possible recession, bringing down markets in Asia, (particularly China), because a vast majority of things such as clothes and such come from China into the US, which also seems to be affecting the European markets.

It is the MLK holiday here, so Wall Street is closed, and that uncertainty is also a factor in the European and Asian markets. http://finance.yahoo.com/

Price always follows demand. In brief, any time there are more buyers than there are sellers, the price for [the widget] will rise. Similarly, anytime there are more sellers than buyers, the price will go down. Regardless of whether the widget is a tangible object, or it's some kind of service or performance, if demand goes up (ie, more buyers than sellers) then prices will rise, but by the same token if demand declines (ie, more sellers than buyers) prices will fall.

With stocks, it's no different. Irrespective of the particular reasons the individual investors are buying or selling, if there is more demand for the shares, the price will rise, but if the demand for shares falls, so will the price.

again, that's the point of my question. no one can say who makes that price change. i know fully well that price follows demand, that's not new...

The price change is computed by huge computers, which keep track of all
the contracts being made in a particular stock exchange.

There was an article in german news magazine DER SPIEGEL on the machinery
in the cellar of frankfurt stock exchange (germany's biggest stock ex-
change) a few month ago, even with pictures, but it also mentioned that
the owners of the stock exchange aren't really interested in too much
publicity about their equipment, therefore no hits in google pictures,
sorry.

I seem to remember that there was quite a mess at some asian (tokio, maybe)
stock exchange one or two years ago, when one of the people responsible
for typing the contracts into the machinery made some sort of typing error,
with devastating results.

Ah yes,
http://en.wikipedia.org/wiki/Tokyo_Stock_Exchange
(see paragraph I.T. Issues)