What are the nuts and bolts of share bazaar?




Answers:    In the stock market, in attendance are fundamentals, there are technicals, in attendance are analyst estimates (rumours?) and there are emotion.

The fundamentals determine the real expediency of a share based on company's adjectives prospects and past conduct whereas the technicals try to predict the fair share price through statistical analysis.

Emotions, informant and individual preferences determine demand and supply of shares and determine the bazaar price of the share. Then the investor would compare this price with any the fundamental value or precise value or analyst estimates to determine whether the share is undervalue and overvalued.

Finally he will make the subsequent trade (sell if overvalued and buy if undervalued) based again on pure mood!

The moral of the story is that even though there are plentiful ex-post theories to explain the price movements of a share, there's no robust theory to predict it (efficient open market, eh!), as the trade is made not by rational machines but by irrational humans (Greenspan anyone?).

There's nil more and nothing smaller quantity to it. I hope it gives you a flying start. So, budge out and trade.

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