Does the value of a share of stock depend on how long you expect to keep it? No and yes. The theoretical value of stock depends on dividends - of which there are three ways to calculate. But there must also be a real capital gain (or loss) between buy and sell dates
What do you expect the dividend to grow indefinitely?
You expect this dividend to grow 10%/year indefinitely. The required return is 20%, what is the price of stock today? it can get more complicated, orginially we assumed that the dividend was zero for the first couple years but but what if it is growing and then it is constant...year 1-$1, year 2 - 2, year 3 - 2.50...
What is the present value of a stock?
*the problem is that you can keep pushing the stock price out into the future. the present value of the stock is always essentially zero. The current price of stock can be written as the present value of the dividends beginning in one period and extending out forever.
How to calculate the current price of a stock?
The current price of stock can be written as the present value of the dividends beginning in one period and extending out forever. P0 = D / (1+R)^1 + D/ (1+R)^2 + D / (1+R)^3 ......
Is it possible to buy and sell stocks on theoretical value?
No and yes. The theoretical value of stock depends on dividends-of which there are three ways to calculate. But there must also be a real capital gain (or loss) between buy and sell dates.
What does the value of stocks depend on?
Stock prices are driven by a variety of factors, but ultimately the price at any given moment is due to the supply and demand at that point in time in the market. Fundamental factors drive stock prices based on a company's earnings and profitability from producing and selling goods and services.
Does stock value increase over time?
If more people want to buy a stock (demand) than sell it (supply), then the price moves up. Conversely, if more people wanted to sell a stock than buy it, there would be greater supply than demand, and the price would fall.
How does the value of a share of stock depend on dividends?
Dividend payments increase demand for a stock and consequently result in a higher stock price. Dividend payments also send a strong message to the investor community and boost the confidence of potential buyers.
How is share value calculated?
Share value (aka, Net Asset Value) is calculated by dividing the total Market Value of the Merged Pool by the Number of Shares.
What happens when you buy more of the same stock?
Opposite from averaging down, averaging up involves buying more shares as a stock rises. This increases the average price paid for a position, but if you are buying into an up-trend, it can amplify your returns.
What happens if no one sells a stock?
When there are no buyers, you can't sell your shares—you'll be stuck with them until there is some buying interest from other investors. A buyer could pop in a few seconds, or it could take minutes, days, or even weeks in the case of very thinly traded stocks.
How long do you have to hold a stock to get the dividend?
Briefly, in order to be eligible for payment of stock dividends, you must buy the stock (or already own it) at least two days before the date of record and still own the shares at the close of trading one business day before the ex-date.
Does the amount of your dividend check affect the value of your stock?
Though stock dividends do not result in any actual increase in value for investors at the time of issuance, they affect stock price similar to that of cash dividends. After the declaration of a stock dividend, the stock's price often increases.
When can you sell a stock and still get the dividend?
If shares are sold on or after the ex-dividend date, they will still receive the dividend. When you purchase shares, your name does not automatically get added to the record book—this takes about three days from the transaction date.
How do you know a stock is good?
Here are nine things to consider.Price. The first and most obvious thing to look at with a stock is the price. ... Revenue Growth. Share prices generally only go up if a company is growing. ... Earnings Per Share. ... Dividend and Dividend Yield. ... Market Capitalization. ... Historical Prices. ... Analyst Reports. ... The Industry.More items...
Is buying one share of stock worth it?
While purchasing a single share isn't advisable, if an investor would like to purchase one share, they should try to place a limit order for a greater chance of capital gains that offset the brokerage fees.
How do you pick a good stock?
7 things an investor should consider when picking stocks:Trends in earnings growth.Company strength relative to its peers.Debt-to-equity ratio in line with industry norms.Price-earnings ratio as an indicator of valuation.How the company treats dividends.Effectiveness of executive leadership.More items...
What percentage of the time do stocks go up?
I didn't forget you. The percentage of stock market days up in this 20 year time period is also 53%, 53.1% to be exact. Our odds are a little better than a coin flip, but it's that small discrepancy that makes us winners in the long run.
What makes a share price go up?
The main factors that determine whether a share price moves up or down are supply and demand. Essentially, if more people want to buy a share than sell it, the price will rise because the share is more sought-after (the 'demand' outstrips the 'supply').
How do stock prices increase?
Stock price is primarily about supply and demand in the stock market, rather than how well a company is doing. The value of a stock is defined by how much an investor is prepared to pay for it. Investors will buy stock if they believe it will increase in value. Stock will increase in value if more investors buy it.
How much can a stock rise in one day?
How much can a share price increase in a day depends on its price band. There are four price bands for stocks in India- 2%, 5%, 10% and 20%, which is decided by the stock exchange. If the price band of a company is 10%, then it can rise or fall, only 10% on that entire day of trading.