Category: Money tips Release Date: 2007-04-02
Because of restrictions on capital flows, the stock supply curve and the general commodity different from
Stock prices are set by supply and demand determined by supply and demand curves of the stock price will be able to understand the general variation.
The stock is different from ordinary commodities important point is that there is restriction on the amount in circulation, which has a scarcity. Therefore, when the number reaches a certain value, even if prices continue to rise, but the supply does not increase, that is, inelastic supply and thus get the stock supply curve (Figure 1). In this supply curve, there is a very important critical point, the critical point of the left, the supply curve of elastic; once crossed the critical point, the supply curve became rigid and flexible worse the closer flow of capital until the complete loss of price elasticity. Can see that the stock supply curve and the flow of capital constraints has a lot to. Suppose a flow of capital stock is large enough, so that it can be seen as an infinite number, then the supply curve reduced to Figure 2, throughout the supply curve, price elasticity difference was not significant, while the critical point at infinity in terms of quantity. In other words, the supply curve in Figure 2 can be seen as the supply curve in Figure 1 the left part of the critical point, or shares in Figure 1 does not meet until the critical point is equivalent to the number of infinity in circulation, with general merchandise and not have the characteristics of scarcity.
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While the stock demand curve does not exist on such a critical point, investors seem to be no reason for share price is lower than a certain value and began a frenzied rush to buy. So, as opposed to ordinary commodities, stock supply curve shape is unique, and the demand curve shape, and there is no specificity.
This is obviously different views of some people, for example, Dr. waves that "the stock demand curve has a complex shape and is different from the vast majority of goods" (Figure 3). In Figure 3, A-area stock price increases will lead to a drop in demand, while in B, but increased demand due to price rise in C, and then changed back to stock price increases will lead to a drop in demand.
However, in my view, the form of supply and demand curves should be determined by the structure has nothing to do with other so-called structure: First, the stock is a commodity, and therefore of general characteristics of demand and supply of goods; Secondly, the stock demand and supply has been constrained ( restrictions on the number of outstanding shares), so there will be some special features of supply and demand. However, this restriction is only binding on the stock while the stock supply constitutes demand and without any constraints, so the stock supply curve shape changes in the stock demand curve shape unchanged.
So how to interpret Figure 3 of the phenomenon? I think it ignores the price and quantity here, in addition to another variable: time.
The stock supply curve and demand curve in determining the stock price, there are two changes: First, have changed, it is a structural change; second is the relative position of the movement, which is caused by non-structural factors, the phenomenon in Figure 3 It is because the supply curve and demand curves over time location of moving making.
Specified as follows (Figure 4):
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1. When supply and demand curve a curve b in the initial position, the stock demand curve in Figure 3, A area, this time rising prices lead to decline in demand;
2. Supply curve b remain unchanged, the demand curve along the supply curve to the right slowly, by a move to c, this process if we do not take them into consideration, then the demand for the stock does rise as prices rise, and this Figure 3 is the B-zone (thick line segment);
3. The new demand curve c remain unchanged, the new supply curve along the demand curve from b to the left slowly moved to the d, the same does not consider the passage of time, then the demand for stocks as prices rise and fall again, and this is the Figure 3 in C (thick line section).
The conclusion is: Figure 3 in the A zone is indeed a part of the demand curve, but the B, and C, only the demand curve and supply curve of the relative positions of movement in terms of time left axis trajectory fills a result, Figure 3 a special form of the demand curve is an illusion.
Of course, the reality of the supply curve and demand curve to move the situation is much more complex (for example, the supply curve and demand curve is likely to move at the same time), but in terms of both principles will not have structural problems.
Through the above description, not only to exclude the stock demand curve in Figure 3 the possibility of the same token, other similar demand curves that stock on behalf of a particular view of the structure are also not substantiated.
Although the stock demand curve is the same as the shape and general merchandise, non-unique. But this does not deny the relationship between supply and demand of the stock is indeed essential difference between the general commodities, such a distinction made from reflexivity Soros: market expectations can be expected from my realization of the action. When the stock price rises, investors, stock prices increase as the psychological expectations, thus the demand curve to the right move. In turn, has prompted the demand curve moving stock prices to rise further, driven investor psychology is expected to be raised further, which is called "the higher the more to buy." General merchandise supply and demand obviously does not have this characteristic.
