Stock Market

[jam17p]

How does the stock Market and the FTSE 100 work? How do they calculate the price of shares?

[COKOL]

Hi Jam17p

This is an interesting question to post on the IT channel, but here goes

FTSE stands for the Financial Times Stock Exchange, which is London's main benchmark index of UK traded stocks.

The FTSE 100 is just a breakdown of the 100 most highly valued companies on the exchange.

The stock markets are a weighted arithmetic index of that values companys' share prices according to how profitable to company is perceived to be. The price of a company's share can go up and down from day to day, or minute to minute depending on how well the company is doing, and, most significantly, how much demand there is for that share and how much traders are willing to pay.

[COKOL]

Hello again Jam17p (this is the second part of my reply)

Initially, share price is decided by the company that issues it. They tend to go according to what they think traders will pay. Bigger companies, with high turn-overs and the potential to attract a growing number of custom and profits can afford to issues higher share prices, because demand for their shares will be high and traders will pay.

However, once a company is listed on the stock markets the share price may go up or down depending on how well the company is doing, if it is meeting profit targets, if it has a good brand image etc., and based on this demand is gauged and a price is set according to that demand. Thus, big companies, with well know brand names and high profits have higher share prices.

This is quite a basic overview. I hope this isn't too basic an answer to your question. Get back to me if you need more detailed info.