The price of a particular share is the value for which it is bought and sold, either first hand (from the company) or in the resale market on a stock exchange.  Whilst every share has a price, it also has what is known as a ‘nominal value’, which is an amount altogether different.  Knowing what a share price is and how a share price is affected by market factors is one of the first steps towards becoming a more prolific stock market investor, and is crucial if you are to realise a return on your investments.

Every share is nominally worth a set amount, that is not variable depending on the particular market climate.  This amount is usually small, and in any case should be far smaller than the amount actually paid for the share on the resale market.  The nominal value of a share is used only in terms of ensuring there is capital in the business from which creditors can be paid, and in the event of insolvency those shareholder who have no fully paid up the nominal value of their share-stock will be liable to contribute accordingly.

The difference between the nominal value and the share price in known as the ‘share premium’, and where this is paid directly to the business issuing the shares it must be ring fenced within a specific share premium account.  The price paid for a share is utterly variable, and this is the amount expressed in stock tickers and on the exchanges, given that this is the amount one would have to pay to acquire an individual share.

Share price is affected by a number of external factors, but at the simplest level it is affected by the demand for that particular security.  Obviously, the number of shares available in a given company is limited at any given point, and thus as more and more shares are bought, the value of those shares automatically increases.  Likewise where those shares are sold and the market becomes flooded with one type of security, the value falls.

Whilst share price is affected by the transactional side of things, indirectly transactions are affected by market externalities and company performance.  In theory, only the performance of a company should impact upon its share price, with those reporting growing profits likely to be in higher demand.  However in all truth, the current state of the marketplace and the economy as a whole has a bearing. 

Take for example the terrorist attacks of September 11th 2001.  Whilst these had nothing to do directly with the performance of many publicly traded businesses, stock markets around the world plummeted as investors sold shares in a fit of panic. 

Ultimately, it is the behaviour of the larger investors that sparks movements in a share’s pricing.  When times are good, share prices boom.  But when the economy starts to turn gloomy, or even when a particular piece of bad commercial news is announced, share prices tend to fall dramatically.