what is the mechanism by which the markets work?

Question

what is it that drives the markets all over the world? like the markets falling after a natural disaster or a terrorist attack.

can someone explain it or instead suggest a good site which can give me this knowledge

i am talking about the sensex and all and not abt the other market.

@debeen, i wud like to know what is the meaning of sensex reaching 11000 points and other similar statements

Answer 1

The following 4 factors are responsible for market movements;
Economic growth; Money Flow: Sentiments and Technical factors.

These need some study and cannot be understood on yahoo answers.

Please visit www. investopedia.com

Answer 2

All markets, whether equity or commodity or even the sleeze market (!) works by the law of demand and supply. In a free economy, the price of the products is based on the supply of the product and demand for the same.

However, if you looking for an answer for the financial markets and the movement in sensex, it is really anybody's guess as good as yours. The markets generally work based on the future earnings in the near foreseeable future - rather than on the past. then again, the price is determined by the demand and suppy, but the demand is created most of the times, either by informed sources (hoping to get more money in the near future) or by ingenious methos (to cheat the existing stock holders).

I guess a lot of this information has to come from the personal experience - and i guess any stock market related books, economics journals would give decent info.

Answer 3

In really simple terms, what drives a market is supply and demand. After something like a natural disaster or terrorist attack, the markets (I assume you are referring to stocks) typically fall because people are scared to buy due to future uncertainty. And when people don't buy, prices fall.

Answer 4

supply and demand, fear and greed..that is all ye need to know!