Question

Please explain in detail how does 1) social 2) political 3) legal and 4) economic issues affect the stock market?

The more information and examples that you provide for each and the more you explain in detail, the better I will understand. Thank you.

Answer 1

Answer : Stock market is a place where there is buyer and seller meet and exchange stock in the market. It is where the flucations has been taken place.

• Social Factor : Social factor is generally influence in the stock market. Sentiments of the investor play an important role in the variation in the stock price. If the investor are quite optimistic , more buying would take place resulted in increase in the share price where as if the investors are adverse than more selling would lead to decreased in the price of share. Example : If investors sell more shares than the price of the shares goes down and vica -versa. Sentiments and emotions of the investors has been effected.
• Political Factors : Political factor means that the government stability has been play an important role in the development of stability and future growth of the country. Example : Change in government policies or territoral attack has been resulted in the change in stock market.
• Economic Factor : Stock market also influenced by economic growth of the country. When there are better prospect for grow.th it will help firm to be more profitable This will help to boost companies dividend and increases the price of the shares. Example As inflation in an economy has decreased the stock market. Higher inflation cause investors to think that company may hold back the spending as well as interest rate also effect the stock market means that money become more expensive result in decrease in proce of stock market.
• Legal factors : Legal factors also influences such as rules and regulation of the country affect the stock price. Example : If the government has tighten the rules and regulation than stock price has been down. The legal factors are mergers and acquisation, dividend announcement etc.