The Value of Historical Stock Prices

May 7th 2016

Investing in the stock market can be a very lucrative endeavor. Many investors devote their lives to following stock prices in order to buy and sell them and earn money. If you’re thinking about investing in stock but are new to the game, there is some valuable information you’ll want to learn before you begin. You probably know that stock prices fluctuate on a daily basis, and are influenced by a number of variables. 

Supply and demand is the basic determinant of the price of stock. The market force of supply and demand sets all initial prices, then, the price will fluctuate depending on demand. When stock becomes in high demand, the price of stock increases. As demand for stock is low, stock prices plummet. This equation is simple; the tricky part is understanding what drives the desire to buy or sell stock. A lot of times, the news can affect a stock’s standing. If bad news about a business is released, like mass layoffs or a new product flop, it may make investors want to sell and vice versa.

Stock prices reflect the perceived value of a company, but they also reflect expectations of how a company will do down the road.

What Are Historical Stock Prices?

Historical stock prices are a record of how stock has performed in the past and what prices it has sold at. You can better predict the price of stock if you know its history. But where can you find information on the history of stock?

It used to be that historical stock prices were hard for the average investor to find, but these days you can uncover historical stock prices on just about any financial portal. Yahoo! Finance is a good place to start. 

How Do I Use Information on Historical Stock Prices?

There are a number of different ways you can use historical stock prices to strengthen your investments. They can be used to make comparisons in order to glean information about the current stock you're researching. For example, if you compare the historical price of a stock to historical prices of its competitors, this could be a predictor of how your stock will behave relative to its competitors in the future. 

Let's say you are looking at stock for Nabisco. If you compare Nabisco's stock prices over the past 2 years with Keebler's stock and see that every time Keebler's stock has risen, Nabisco's has as well (or vice-versa), it might be fair to assume that next time Keebler's stock rises, Nabisco's will rise in congruence. 

The same holds true for comparing your stock to the industry as a whole - if you have Amazon stock and it tends to stay steady when the services sector as a whole falls, then that can be a valuable indicator that Amazon has strong and consistent stock. Additionally, seeing how your stock has historically compared to the changes in the Nasdaq100 and the S&P will give you further insight into its future behavior. If your stock drops immediately every time the market as a whole takes a dip, you will have less time to sell it at a higher price than a stock that is not so reactive to market fluctuation. 

Although history is not a perfect predictor of future performance, it does offer valuable information about the tendencies certain stocks have to rise and fall in correlation to the rest of the market. This information can help predict behavior and make more informed, less risky investments. 

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