Question
Asked Oct 26, 2019

Why might a company’s stock price fall after record earnings are announced? Conversely, why might the stock price increase after losses are disclosed?

check_circle

Expert Answer

Step 1

The current price at which the share of stock is sold and purchased in the market is called stock price. The fluctuations in demand and supply, unexpected gains and losses, etc., determine the value of stock price.

Step 2

It is generally expected that the stock price will rise when the company is in profit. Whereas it will fall when the company is in loss.

Step 3

However, a company may also observe a rise in its stock price even after losses. This may happen due to following reasons-

  • Windfall gain- Sudden rise in earnings due to occurrence of any unexpected event like rise in demand due to change in tastes and preferences of consumers.
  • Improvement in performance of employees – Skill development and training programs conducted by business firms can improve labor productivity. This may further advantage the production process of the firms.
  • Introduction of new bus...

Want to see the full answer?

See Solution

Check out a sample Q&A here.

Want to see this answer and more?

Solutions are written by subject experts who are available 24/7. Questions are typically answered within 1 hour.*

See Solution
*Response times may vary by subject and question.
Tagged in

Business

Economics

Other

Related Economics Q&A

Find answers to questions asked by student like you

Show more Q&A add
question_answer

Q: What are the major characteristics of a firm competing under conditions of oligopoly?

A: Characteristics of a firm under oligopoly.

question_answer

Q: In year one,  Adam earns $1,000 and saves $100. In year 2, Adam gets a $500 raise so that he earns a...

A: MPC or marginal propensity to consume is the change in consumption of a person due to change in his ...

question_answer

Q: Firms A and B are contemplating whether or not to invest in R&D. Each has two options: “Invest” ...

A: The analysis of the outcomes of strategies available to players, when the choice of strategy of one ...

question_answer

Q: Suppose the CPI was 110 last year and is 121 this year.  Instructions: In part a enter your answer a...

A: Inflation: It refers to the rise in the general price level over a period of time.Deflation: It refe...

question_answer

Q: the cost of producing a bottle of zlurp is 1.50, and the competitive suppliers sell it at this price...

A: You posted an incomplete question. Please make sure you post a complete question next time. We are s...

question_answer

Q: In five years, a salary of $56,000 per year with a 55% growth due to cost-of-living adjustment in th...

A: The salary of the individual is given to be $56,000 per year and the growth is said to be of 55 perc...

question_answer

Q: Under perfect competition, individual firms have no control over price. Therefore, the firm’s margin...

A: Under perfect competition, individual firms have no control over price. Therefore, the firm’s margin...

question_answer

Q: If buyers are required to pay a tax on top of the price, buyers' willingness to pay will:     ...

A: The demand is not only the willingness to purchase a commodity by an individual, but as well as the ...

question_answer

Q: Make the case in favor of international trade based on comparative advantage. Who are the winners an...

A: Hey, Thank you for the question. According to our policy we can only answer 1 question per session. ...