Why Do Stock Prices Go Up?

It is not a simple math

If the price is what we pay in exchange for the value we get then why do stock prices keep going up and down every second? Will I buy an iPhone if the price keeps increasing every month?

There will be a ceiling beyond which I will start looking for alternatives. But the same logic never really applies for stocks. Part of the problem is in our head and part of the problem is because of the myriad of players who are in the market.

How does our razor-sharp mind that’s capable of assigning a value and price ceiling to a car or a smartphone become naive when dealing with rising stock prices.

Case 1:

On October 19, 1987, widely known in the Investment world as Black Monday, the Dow Jones Industrial Average declined by 22.6%. The panic was so severe that the rout in the US market spread to exchanges around the world wiping out $1.7 trillion.

To this day, people and scientists are still debating what caused the crash. We still don’t have a clue. There was no economic stress nor was there an asset bubble that blew up on our face, but still, global markets lost a sizable portion of their valuation.

“Two of the biggest up days in history occurred that week, and three of the biggest down days occurred. And nothing was happening, other…