Press releases can send share prices soaring or plummeting. Here you can find important clues for your assessment. What normally influences the price of a share? First and foremost, supply and demand determine the share price. Both factors are mainly influenced by company-related data. They provide indications of a company's future development. In the second instance, key interest rates, the economic environment and industry news count.
Company-related factors include:
sales and profits
management
competition
Demand for a stock increases when the company has a good chance to grow and make higher profits. In this case, the stock is usually bought and the share price increases. If the press release indicates worsening prospects, the shares are sold and the share price falls.
When does the stock market not react to news?
However, it can also happen on the stock exchange that the share price does not react to a press release. A typical example of this is a company's quarterly report.
If it is in line with analysts' estimates, the share price often hardly reacts at all. The stock market has already priced it into the share price before it is published (eskomptiert). If the earnings report is expected to be good, the share price has already risen. In the case of lower sales or profits, the share price has already fallen. In both cases, the press release has turned out to be a non-event.
If the quarterly results are surprisingly far below expectations, the shares usually fall further. Stockbrokers expect analysts to downgrade these shares to "sell." They sell to escape the consequences of the downgrade. In the opposite case, the stock price continues to rise because the market expects the stock to be upgraded to "buy."
Which press releases really influence the share price?
There are actually news items where the share price has almost always reacted in the past.
Competitors make an appearance
Example:
In May 2018, Facebook announced the launch of its own online dating service. In the U.S., about 27 percent of smartphone owners have a dating app installed. This press release hit the competition hard. Shares in Match Group, the provider of the dating apps Tinder and OkCupid, plunged 22 percent to $36.71 in the meantime. Facebook shares reacted cautiously positive.
Soccer games and sporting events
Example:
In addition to the results of a soccer game, expectations and the location of the game also affect soccer stocks. Economists at the Technical University of Munich came to this conclusion in a study using the BVB share as an example. They compared the changes in the Borussia Dortmund share price after six Borussia games with the corresponding daily values of the overall market. On the first trading day after a win, the BVB share price rose by an average of 1.31 percentage points, while defeats resulted in a drop of 2.83 percent. A draw produced a negative effect of 1.78 percent on average. The TU scientists' findings were also confirmed for the shares in the Stoxx Europe Football Index in https://exnesslatam.com/pt-br/conta-profissional/. Since the index also contains less liquid soccer stocks, the price swings were somewhat weaker.
Conclusion:
Supply and demand normally influence share price
Press releases can influence the share price, but do not have to do so
Blue-chip stocks may be able to ride out price declines
For volatile and small-cap stocks, the best way to limit the risk of loss is to place a stop-loss order.
