What factors affect the cost of shares?

Investing in shares can be affected positively or negatively by certain factors. Reading this article will enable you to distinguish the different factors that affect the cost of shares.

The economic downturn 

The economic conjuncture is one of the first factors that influence the cost of shares. For example, buying tencent stock can be impacted by an economic conjuration. First of all, you have to understand that economic activity is irregular, it is cyclical. We will go through phases of expansion, phases of growth, phases of recession, phases of crisis and phases of depression. 

The first phases are those of growth and expansion. At this point you have an increase in economic indicators. During the expansion phase, you will at some point have a crisis phenomenon or a break in the growth movement. Behind this phase there is usually a slowdown phenomenon. This slowdown is expressed in two ways, either by a depression or by a recession. Thereafter, there is a recovery in economic activity. This is why we speak of a cycle. 

Speculation 

Speculation is also a factor that affects the cost of shares. Indeed, speculation consists of buying and selling an asset with the aim of making a profit. For example, a company may buy wheat for five tonnes today and sell the same wheat in one or two years at an excessively high price. It is much the same with virtual currencies. Speculation creates liquidity. 

Liquidity is the ease with which one can buy and sell an asset. By creating liquidity, speculation could be beneficial for economic growth. It should also be added that the speculator can bear the risk for other economic agents. This represents a kind of importance or advantage of speculation. The speculator takes the risk in the hope that he can earn a speculative gain. But in doing so, the interest of the speculator is to allow the risk-averse to get rid of it.