Q:

What factors affect a stock's closing price?

A:

Quick Answer

A stock's closing price is impacted by numerous factors, such as momentum, valuation, market sentiment and growth expectations, states U.S. News & World Report. These factors are extremely dynamic, which can lead to volatility of stock prices.

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What factors affect a stock's closing price?
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Full Answer

A closing price is defined as the final price at which a stock trades during a regular trading session, notes the U.S. Securities and Exchange Commission. These times can vary depending on the specific market and exchange. In some instances, after-hours trading is allowed; however, the Consolidated Tape Association has prevented any confusion by labeling after-hour prices with the letter T. This measure has been taken to standardize the closing price that is made publicly available to investors.

Momentum is a significant factor impacting closing price, notes U.S. News & World Report. It is a combination of investor psychology and volume. Volume is the number of shares transacted on a given day, states NASDAQ.

Market sentiment, or the public's general perception of the economy in general, also determines a stock's closing price, explains U.S. News & World Report. Valuation is yet another factor. Investors utilize valuation metrics such as price-to-earnings ratio to determine how a stock is performing. In addition, price expectations, instead of current price, about a company are a stronger determinant of stock value, notes About.com. These growth expectations relate to the individual company itself as opposed to an organization's performance related to more macroeconomic metrics, such as gross domestic products, notes U.S. News & World Report.

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