Stock Price Volatility

Stock prices are characterized by volatility. When significant changes occur, investors tend to panic.

Different factors influence the movement in stock prices. For example, when the events in Asia of 1998 occurred, the prices of stocks got really dynamic, which was reflected in a negative way even on investors that held high expertise. During the following months the S&P 500 experienced one of its highest drops of 20% observed in recent times. This fall was later followed by a huge increase of 30%, which in itself represented a record climb.

The media concentrated its attention to the Dow and spoke of stocks as if they were deprived of any volatility. What happened actually was that different companies experienced the events in different ways since they were affected in varying degrees.

Going back to the 1998 crisis, investors generally bought stocks of companies that have proven their consistency and were part of the Dow. They preferred them because they represented a higher degree of stability. On the other hand, negatively influenced were companies of a smaller size.

During these times, the technology industry enjoyed positive attitude since the Internet has gained more popularity. However, oil-equipment companies sustained losses since they were greatly affected by the Asian crisis.

So, having in mind these factors, the prices of stocks are very volatile. They tend to be influenced by the news going around. Investors try to determine the influence of different news on the price of stocks. Additionally, the stock market is susceptible to the influence of different events both of economic and political character.

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