suppose there are 10 sellers who quote their selling price differently on the other hand
there are 'n' buyers who want to buy stock at different prices how is the final price of
stock is determined .please elaborate on the stock auction process????
2007-04-27 00:07:33 · 5 answers · asked by kashyff 2 in Business & Finance ➔ Investing
All stocks have what is known as a market maker, actually maybe several. The purpose of the market maker is to ensure a liquid market in the stock. The market maker does that by buying for inventory when there are no other buyers and selling from inventory when there are no other sellers. It is not however an altruistic undertaking. There is a profit to be made doing so, because the market maker can actually set the price of the stock using the bid ask spread. In other words the market maker is willing to pay less for the stock than he is willing to sell it for. A spread of 2 or 3 cents a share on a million shares a day yields a very healthy profit. There are times when the market maker does loose money such as during steep drops in the market prices in general.
2007-04-27 00:20:17 · answer #1 · answered by Anonymous · 1⤊ 0⤋
The highest bidder trades with the lowest seller, provided the highest bidder is above the lowest seller's price. The difference is kept by the market maker. In the case of the NASDAQ, which is a dealers' market, the bid and ask are strictly determined by the dealer, with the outside bids serving as information on supply and demand.
Trades continue until there is no longer a profitable (for the dealer) trade available. In the case of the exchanges, trades continue as long as the bids cross one another.
2007-04-27 07:17:38 · answer #2 · answered by OPM 7 · 0⤊ 0⤋
No one decides the stock price...
It is just the buyer.
Predicting out of his own caluculations and assumptions, a trader or an investor will buy a particular share, thinking that the price will increase in days to come.
There are as many cases of failures as of successes.
For new entrants like u, its better not to enter in to trading, just invest in them before they even come for tading!
2007-04-27 07:18:21 · answer #3 · answered by Sanjeev 2 · 0⤊ 0⤋
There are some factors that can generally guide people in determining the value of the stock to them, like the present value of the future dividends, or the value of the firm itself, or the value of its earnings, but it isn't easy to explain. There is speculation or excitement that goes with trading stocks that defies logical explanation, and bubbles are created.
2007-04-27 07:17:17 · answer #4 · answered by CanadianBlondie 5 · 0⤊ 0⤋
Supply and demand ........ the backbone of free enterprise.
2007-04-27 07:11:30 · answer #5 · answered by Jack 6 · 0⤊ 0⤋