Hey group,
Sometimes I've noticed that a share's previous close price is not equal to its open price the following day. For example, check out Lloyds TSB shares today.
Open 605,00 Previous Close 602,50
This has happened on more than one occasion and also with other stocks. What causes this?
Thanks all.
Overnight news. Trading in a foreign market.
The open is just the price at the start of the day - there is really no reason why it should be the same as the previous days close - except inertia.
When a off licence closes it might be selling Stella at a pound a can. The next day the local tramp is desperate to get his hand on a can so offers £1.20 to get his hands on the first one out of the chiller.
Thus the closing price of Stella was £1 and it opened at £1.20 the next day.
Hmm...I thought market perceptions like demand are accounted for by people physically buying more shares and driving the SP up. So are you saying that a company's SP might fluctuate based on market mood or its reputation alone, before a single share is traded?
What is the difference between market capitalisation and a company's net worth? (Sorry for the basic questions, I'm learning finance stuff as I go)
I suspected before that the different close/open prices was because of after hours trading, but it looks like I was wrong.
Incidentally, I think Lloyds TSB shares will rise by at least another
20p or so before the annual financial results are announced on 23rd Feb, due to rising interest rates thanks to the BoE, strong property market (and thus mortgages) and strong consumer spending (and thus borrowing levels). Do you think I might have overestimated how high it will go?
Yes, imagine I'm sitting at home and see the news at 10pm that the Carling brewery has burnt down. I'm sure that Stella will cost more tommorrow and its share price will go from £1 at the end of today to £1.50 by the end of tommorrow. I want to grab as many shares as possible at a reasonable price, but it will need to be higher than today's close to convince people to sell. So I email my broker and tell him to buy everything available at £1.20 and the price opens at £1.20.
Dunno
They may go up 20p. Who knows. But rising interest rates are intended to reduce the strength of property market and level of consumer spending, and will increase bad debts. In other words the factors you mention are conflicting and the result depends on how the balance works out.
Toom
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