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    Factors that Drive Fluctuations in Market Prices

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    If you were to pick the single most important factor that drives the fluctuation in the short term stock market prices, what would that factor be, and why do you think that it is the chief factor that drives short term fluctuations?

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    There are many factors that can drive market fluctuations in the short-term. These include the economic situation of the country as measured by the growth rate, market rumors and speculations, political stability of a country and the performance of individual companies associated with the stock.

    If I were to pick the chief factor that contributes to the volatility in short-term, I would pick market rumors and speculations that operates almost all the time.

    The reason I would pick market rumors and speculations as the major driver of short-term fluctuations is because investors tend to over-react or react hastily to the slightest market rumors. Often there is a rush of selling and panic during negative rumors about the market/ particular stocks and this leads to a decline in stock prices. Similarly, positive rumors can lead to a rush of buying.

    You can choose any other factor of your choice and write in your own words why you think its most important using the article I give below as input.

    Please cite the following article as source:

    I have included part of the article below:
    Demand and Supply

    This golden rule of economics holds true even when it comes to the stock market. When demand for stocks is greater than supply, stock prices will go up. This happens when everyone starts to chase after ...

    Solution Summary

    Factors that cause fluctuation in short term stock market prices are discussed.