question: Stock Rates and their change of value. Is it really only supply and demand ?
comment: Short answer: Yes, but it represents literally nothing but the last price someone bought or sold a share for. It does not represent "true value". Long answer: Stocks, otherwise known as shares, are how people own corporations. Every share (for the purpose of this answer) comes with a vote in how the company is run. Whenever a corporation makes so much money that it doesn't need all of it for its operations, the shareholders can decide to take a chunk of that profit for themselves, which is paid out by giving an equal amount of money to the holder of each share (a dividend). So if you own 2 shares in a company that has 5 shares, you have 40% of the votes in any decision on how the company is run, and you'll get 40% of any dividend announced by the corporation. If you own 2,000 shares in a company that has 5,000 shares, you're in the exact same position. When a corporation first sells its shares, it's as a way of raising money. So if I had a great idea (synthetic meat!) but not enough money for a factory, I might create a company (MeatCo) with 5 shares (but with zero assets other than my idea), and then sell 2 of those shares to a rich guy named Fred for $1 million a share. This is called an initial public offering (an IPO). Now Fred owns 40% of MeatCo, gets 40% of the votes, will get 40% of whatever profit MeatCo makes, and the corporation has $2 million it didn't have before, which it can spend to build that factory. Let's say a year goes by. MeatCo is selling a few vat-grown steaks and getting a lot of hype, but it's not very profitable yet - there's no extra money available to pay a dividend to the shareholders. Fred is getting cold feet. He's spent $2 million and received nothing in exchange, yet. All he's got to show for it are two lousy scraps of paper that say "MeatCo" on them. So Fred goes to the stock market and asks whether anyone wants to buy his shares. In America the stock market is a lightning-fast digital monstrosity with umpteen regulations and millions of participants making complicated moves, but at its heart, a stock market is essentially a bunch of rich guys like Fred who might be willing to buy your shares from you. So Fred walks into the stock market, which you can imagine as a barbershop. Fred says he's got a couple shares of MeatCo to sell, and is anybody interested? Everybody in the barbershop thinks for a moment. They consider essentially three things: (i) how long they guess it's going to take MeatCo to become profitable enough to start producing dividends, and how large and consistent those dividends are going to be (this is known as investing), (ii) whether they might be able to buy the MeatCo shares low, and then sell them high to somebody else (this is known as speculation), and (iii) based on those factors, how much a MeatCo share is worth to them. Fred says he's willing to sell his shares for the same price he bought them at: $1 million per share. This is the "ask", the lowest price at which someone is willing to sell. Only one guy in the barbershop (Bob) wants MeatCo shares, and he's willing to pay $800,000 for both shares. This is known as the "bid", the highest price at which someone is willing to buy. The difference between the "bid" and the "ask" is known as the "spread". Fred doesn't like the offered price, and leaves. The next day Fred comes in to see if anybody's willing to change their mind. Somebody else, Rick, read an article on MeatCo the previous night, and now he says he's willing to buy one of Fred's shares for $900,000. Fred decides he's okay with that, and since Rick only wants one share, Fred only sells one. Now there's a new market price for MeatCo shares: $900,000. The new spread between the bid and the ask is $100,000, representing the difference between the best price available (Bob at $800,000) and the least that Fred is willing to sell for ($900,000). In the real world, this process might happen millions of times a day. So what do we know about the "value" of MeatCo shares after all that? Nothing. Maybe steak sales will spike and Fred will frantically attempt to buy back the share he sold for $1.2 million. Maybe steak sales will crater and Rick will panic and sell the share he bought for $500,000. Each time this happens, the number on the stock ticker will jump or fall, but value hasn't been created or destroyed - the price of the thing is just changing. As Benjamin Graham once said about value: > In the short run, the market is a voting machine but in the long run, it is a weighing machine. Eventually the market will get it right, but some very silly things can happen along the way.
passages: The supply of shares is tracked on a daily basis from the announced actions of companies in the stock market, who are the biggest players in the stock market because they actively control the number of shares available for investors to buy. Supply can shrink by the amount of corporate buying that takes place (cash takeovers and new stock buybacks), and can grow as companies either sell new shares (IPOs) or introduce new shares to the market in the form of follow-ons, secondaries, and convertibles.
   BULLET::::5. LPP (Last Purchase Price) method
  
  BULLET::::6. BNM (Bottle neck method)
  
  The calculation can be done for different periods.
  
  If the calculation is done on a monthly basis, then it is referred to the periodic method.
  
  In this method, the available stock is calculated by:
  
  ADD Stock at beginning of period
  
  ADD Stock purchased during the period
  
  AVERAGE total cost by total qty to arrive at the Average Cost of Goods for the period.
  
  This Average Cost Price is applied to all movements and adjustments in that period. 
   Another way of describing the supply of shares in the market is to call it the U.S. equity float. The change in supply is a change in the float. TrimTabs developed a formula for estimating the change in float by this equation: Float = New Offerings + Net Insider Selling – 2/3 New Cash Takeovers – 1/3 Completed Cash Takeovers – New Stock Buybacks.
   Historical P/Es are computed by taking the current price divided by the sum of the EPS for the last four quarters, or for the previous year. Historical trends of the P/E should also be considered by viewing a chart of its historical P/E over the last several years (one can find this on most finance sites like Yahoo Finance). Specifically consider what range the P/E has traded in so as to determine whether the current P/E is high or low versus its historical average.
   The price of a stock fluctuates fundamentally due to the theory of supply and demand. Like all commodities in the market, the price of a stock is sensitive to demand. However, there are many factors that influence the demand for a particular stock. The fields of fundamental analysis and technical analysis attempt to understand market conditions that lead to price changes, or even predict future price levels. A recent study shows that customer satisfaction, as measured by the American Customer Satisfaction Index (ACSI), is significantly correlated to the market value of a stock. Stock price may be influenced by analysts' business forecast for the company and outlooks for the company's general market segment. Stocks can also fluctuate greatly due to pump and dump scams.
   Supply and demand are varied when investors try to shift allocation of their investments between asset types. For example, at one time, investors may wish to move money from government bonds to "tech" stocks, but they will only succeed if somebody else is willing to buy government bonds from them; at another time, they may try to move money from "tech" stocks to government bonds. In each case, this will affect the price of both types of assets.
   BULLET::::- The use of average and standard demand assumes it is constant. For seasonal demand (for example high in summer, low in winter), the formula will consistently produce stock outs in summer and waste in winter. Similar errors apply for demand that grows or declines. That does not invalidate the formula, but it influences the parameters to be input into the formula in each time period.
   Stock-taking may be performed as an intensive annual, end of fiscal year, procedure or may be done continuously by means of a cycle count. An annual end of fiscal year stock-taking is typically undertaken for use in a company's financial statements. It is often done in the presence of the external auditors who are auditing the financial statements.
  
  Periodic counting is usually undertaken for regular, inexpensive items. The term "periodic" may refer to annual stock count. However, "periodic" may also refer to half yearly, seasonal, quarterly, monthly, bi-monthly or daily. For expensive items a shorter period of stock-taking is preferred.
   Options and warrants are converted at pre-defined rates. As the stock price increases, their value increases dollar-for-dollar. If the stock is valued at a stable price-to-earnings ratio (P/E) it can be predicted that the options' rate of increase in value will be 20 times (when P/E=20) the rate of increase in earnings. The calculation of "what percentage share of future earnings increases goes to the holders of options instead of shareholders?" is
   In discrete time, the change in a stock variable from one point in time to another point in time one time unit later (the first difference of the stock) is equal to the corresponding flow variable per unit of time. For example, if a country's stock of physical capital on January 1, 2010 is 20 machines and on January 1, 2011 is 23 machines, then the flow of net investment during 2010 was 3 machines per year. If it then has 27 machines on January 1, 2012, the flow of net investment during 2010 and 2011 averaged formula_1 machines per year.
   In modern national accounts, an empirical proxy of the flow of variable capital is the wage-payments associated with productive activity in an accounting period, and a proxy for constant capital (flow measure) is depreciation charges + intermediate consumption; a stock measure of constant capital would be the fixed capital stock plus the average value of inventories held during the period of account (usually a year). However, because the "circulating" component of constant capital (denoted "Cc") includes purchases of external services and other operating costs, the stock of Cc is sometimes measured as the flow of intermediate consumption divided by the average inventory level.
   This list is up to date . Indicated changes in market value are relative to the previous quarter. 
  
  Section::::Publicly traded companies.:2015.
  
  This "Financial Times" Global 500–based list is up to date . Indicated changes in market value are relative to the previous quarter.
  
  Section::::Publicly traded companies.:2014.
  
  This Financial Times Global 500–based list is up to date . Indicated changes in market value are relative to the previous quarter.
  
  Section::::Publicly traded companies.:2013.
  
  This "Financial Times" Global 500–based list is up to date as of December 31, 2013. Indicated changes in market value are relative to the previous quarter.
   When a stock drifts through the neckline on small volume, there may be a "wave up", although it is not certain, but it is observed, the rally normally does not cross the general level of the Neckline and before selling pressure increases, the steep decline occurs and prices tumble with greater volume.
  
  Section::::Characteristics.
  
  BULLET::::- Most of the time Head and Shoulders are not perfectly shaped. This formation is slightly tilted upward or downward.
  
  BULLET::::- One shoulder may appear to droop.
   Determine the appropriate discount rate and discount factor for each year of the forecast period based on the risk level associated with the company and its market.
  
  Example:
  
  MedICT has chosen their discount rates based upon their company maturity.
  
  Section::::Using the DCF Method.:Determine Current Value.
  
  Calculate the current value of the future cash flows by multiplying each yearly cash flow by the discount factor for the year in question. This is known as the time value of money.
  
  Example:
  
  Total current value = 62.14
  
  Section::::Using the DCF Method.:Determine the Continuing Value.
   Comparison of the IGAR across stocks in the same industry may give estimates of relative value. IGAR averages across an industry may give estimates of relative expected changes in industry growth (e.g. the market's imputed expectation that an industry is about to "take-off" or stagnate). Naturally, any differences in IGAR between stocks in the same industry may be due to differences in fundamentals, and would require further specific analysis.
  
  Section::::Market criteria (potential price).
   Cash and cash equivalents are listed on balance sheet as "current assets" and its value changes when different transactions are occurred.These changes are called "cash flows" and they are recorded on accounting ledger. For instance, if a company spends $300 on purchasing goods, this is recorded as $300 increase to its supplies and decrease in the value of CCE. These are few formulas that are used by analysts to calculate transactions related to cash and cash equivalents:
  
  "Change in CCE = End of Year Cash and Cash equivalents - Beginning of Year Cash and Cash Equivalents".
   The modified duration is the percentage change in price in response to a 1% change in the long-term return that the stock is priced to deliver. Per the relationship between Macaulay duration and Modified duration:
  
  The other formula for the same is - D = saa
  
  Section::::Derivation.
  
  The Macaulay duration is defined as:
  
  where:
  
  BULLET::::- formula_7 indexes the cash flows,
  
  BULLET::::- formula_8 is the present value of the formula_7th cash payment from an asset,
  
  BULLET::::- formula_10 is the time in years until the formula_7th payment will be received,
   BULLET::::- Service level is the desired probability of meeting demand during the lead time without a stockout. If the service level is increased, the required safety stock increases, as well.
  
  BULLET::::- Forecast error is an estimate of how far actual demand may be from forecast demand.
  
  Assuming that demand during successive unit time periods are independent and identically distributed random variables drawn from a normal distribution, the safety stock can be calculated as:formula_1where,
   Empirical studies have demonstrated that prices do not completely follow random walks. Low serial correlations (around 0.05) exist in the short term, and slightly stronger correlations over the longer term. Their sign and the strength depend on a variety of factors.
   Section::::Publicly traded companies.:2012.
  
  This "Financial Times" Global 500–based list is up to date as of December 31, 2012. Indicated changes in market value are relative to the previous quarter.
  
  Section::::Publicly traded companies.:2011.
  
  This "Financial Times" Global 500–based list is up to date as of December 31, 2011. Indicated changes in market value are relative to the previous quarter.
  
  Section::::Publicly traded companies.:2010.
  
  This "Financial Times" Global 500–based list is up to date as of December 31, 2010. Indicated changes in market value are relative to the previous quarter.
  
  Section::::Publicly traded companies.:2009.
   A flow (or "rate") changes a stock over time. Usually we can clearly distinguish inflows (adding to the stock) and outflows (subtracting from the stock). Flows typically are measured over a certain interval of time – e.g., the number of births over a day or month.
  
  Synonyms
  
  Section::::Calculus interpretation.
  
  If the quantity of some "stock" variable at time formula_2 is formula_3, then the derivative formula_4 is the "flow" of changes in the stock. Likewise, the "stock" at some time "t" is the integral of the "flow" from some time when the time was zero until time "t".
   Section::::Methods for calculating safety stocks.
  
  Section::::Methods for calculating safety stocks.:Reorder point method with demand and lead time uncertainty for type I service.
  
  A commonly used approach calculates the safety stock based on the following factors:
  
  BULLET::::- Demand is the number of items consumed by customers, usually a succession of independent random variables.
  
  BULLET::::- Lead time is the delay between the time the reorder point (inventory level which initiates an order) is reached and renewed availability.
   Section::::Using the DCF Method.
  
  Section::::Using the DCF Method.:Determine Forecast Period.
  
  The forecast period is the time period for which the individual yearly cash flows are input to the DCF formula. Cash flows after the forecast period can only be represented by a fixed number such as annual growth rates. There are no fixed rules for determining the duration of the forecast period.
  
  Example:
   BULLET::::4. Warehouse receives the goods,
  
  BULLET::::5. Warehouse stores and distributes to the stores,
  
  BULLET::::6. Shops and/or consumers (e.g. wholesale shops) receive the goods,
  
  BULLET::::7. Goods are sold to customers at the shops.
  
  The management of the inventory in the supply chain involves managing the physical quantities as well as the costing of the goods as it flows through the supply chain.
  
  In managing the cost prices of the goods throughout the supply chain, several costing methods are employed:
  
  BULLET::::1. Retail method
  
  BULLET::::2. Weighted Average Price method
  
  BULLET::::3. FIFO (First In First Out) method
  
  BULLET::::4. LIFO (Last In First Out) method
   Section::::Example of SFC model.:The model structure.
  
raw_presuppositions: Stock rates' change of value reflect the value of supply and demand.
raw_corrections: Stock rates' change of value does not reflect the true value of what someone bought and sold stocks for.