2007-12-03 02:36:41 · 4 answers · asked by carly 2 in Business & Finance ➔ Other - Business & Finance
People (Investors) believe that the market price of a stock... or in the case of a whole market crash isn't worth what it is being sold for. They believe that the stock price will go down and therefore sell it before it goes lower.
When done on a mass scale, this leads to panic and others being selling their stocks as well. The investing community believes that the prices they are paying for stocks is too high and they sell off waiting for the prices to drop so they can buy the same stocks at a lower price. The stocks do drop to a lower price and investors buy again. This is why the market has always rebounded.
Cheers
2007-12-03 02:42:49 · answer #1 · answered by Chris M 2 · 0⤊ 0⤋
Market price on the stock market is the result of complex forces acting at one time in different or similar directions. But the market price of a particular share finally should be the real reflection of fundamentals. This is, no doubt be the truth of the long term. But being cynical and sensitive to the daily dynamics capital markets inherited a tendency to overact. The clear domination of bull operators pushes the system upwards and to an unreasonable p/e multiples as the demand and supply of the shares ultimately determines the movements on a particular day or for the particular period in the short term. When these sort of upward movements are not supported by under laying fundamentals the formation of bubble starts. But the time and a moment would certainly come where the inflated values should inherently take a beating and quite converse would happen triggering the fall in prices. When these factors are further fueled by the other micro and macro economic indicators it poses a threat even to the realistic values and the demand and supply theory starts working negatively leading to a crash. But ultimately only fundamentals would survive.
2007-12-03 11:02:30 · answer #2 · answered by Chundi R 2 · 0⤊ 0⤋
A normal day there are buyers and sellers for the various stocks on the stock exchange(s). When there are more buyers than sellers the the market goes up, more sellers, the market goes down.
When there is a rush to sell, with few buyers and the Dow Jones Industrial Average (blue chip stocks like IBM, Johnson and Johnson etc..) goes down significantly - then you have a "crash".
2007-12-03 10:41:14 · answer #3 · answered by Fester Frump 7 · 0⤊ 0⤋
DWI or using a cellphone without a hands free device.
2007-12-03 10:39:13 · answer #4 · answered by Paul W 3 · 0⤊ 2⤋