Impact of the News on Stock Prices

When you invest in shares, it is important to regularly review the news because it affects the stock prices. The news may be good, bad, or neutral and you must be able to understand its possible implications and how much impact will it have on the stock markets.

Good and bad news

When the news is good, you will see a rise in the stock market and vice versa. Some examples of good news include joint venture announcement, healthy growth in sales, and excellent results declared by a company. In most of these cases, the stock prices must see a steady increase. Sometimes, you may see an actual decline in the share price. This is because unofficial announcements also impact the prices. Often, the stock markets ‘price in’ the expectations and when these are met, there may be a slight decline.

Bad news has greater implications and generally, the prices are significantly affected. This may result in the loss of investors’ interest in the shares. Market sentiment also plays an important role. If the environment is negative in general, even the smallest news may have a huge impact.

Sometimes, bad news may actually not be negative. For example, when the board of directors makes tough decisions like firing the top management officials, it may initially appear as bad. However, in the long run, these decisions positively impact the company’s growth and prospects.

Staying updated

News that affects market sentiments is available through differentmediums, such as television and newspapers. However, the Internet now provides a large number of online blogs that reports the news as well as stock market news. A major difference between blogs and traditional media is that the former is usually maintained by an individual who regularly posts commentaries. Many of these blogs comprise the actual news along with opinions about the same.

To conclude, it may be stated that news directly impacts the equity markets. However, even analysts face difficulties in accurately predicting the relationship between the stock market and news. The stock market is not only affected by the domestic news. International occurrences may also adversely affect the stock prices and staying abreast ofglobal affairs is equally important.