More Than Just a Price: What Is Included in a Stock Price?

Stock prices can be traced back to the year 1602, when the Dutch East India Company (VOC) became the first company in the world to issue publicly tradable shares. The first stock exchange was established in Amsterdam where shares were regularly traded and prices were still recorded by hand.

By the middle of the 19th century, it became clear for the first time how technological advancement had continued to spur development of exchange trading over time. At the time, trading was revolutionized by the stock ticker, an electro-mechanical device for relaying price information via telegraph lines.

Especially in the USA, where the New York Stock Exchange ticker was first introduced in 1867, prices could now for the first time be broadcast to various cities in almost real time. This created the basis for quick and reliable market information, which is essential for efficient markets.

The share price – and therefore the value – of a company is determined by supply and demand. The exchange is where buyer and seller meet – the former looking to buy at the lowest possible price, and the latter looking to sell at the highest possible price. 

Each time they agree on a price and a trade is executed, the price is recalculated. This price negotiation is carried out in accordance with clear regulations and is done so publicly. This allows investors to continuously form their own opinions – and to have an influence on the price with their own buy or sell orders. 

Looking at a company’s stock performance is like reading its diary. Rising, falling, or stagnating stock prices describe not only the market environment of the time, with boom times and crashes, war and peace as well as calmer phases of stabilization, but also how robustly a company has overcome crises or benefited from industry trends.

For investors in particular, this retrospective look is extremely valuable. Although past performance is no guarantee of future performance – as underscored in every financial disclaimer – historical stock performance certainly can provide indications regarding the management quality, responsiveness, and future prospects of a company.

Stock prices reflect not only economic facts relating to a company, sector, or an entire economy, but also serve as an expression of expectations, hopes, or doubts on the part of investors.

A stock price is more than a current market value – it is a public sign of trust. When a stock price rises, investors believe in the strategy, the business model, and the future viability of a company. But this trust isn’t based on expectations alone – it’s also reinforced by the formal stock exchange listing, which comes with disclosure requirements, regular audits, and clear regulatory standards.

Thus stock prices not only reflect the economic facts of a company, industry, or an entire economy, but they are also an expression of the expectations, hopes, or skepticism of all those who invest their money in a company, industry, or region of the world.

As mentioned, stock prices don’t only describe individual companies. They feed into indices, which in turn track entire sectors or economies. The IBEX 35 and the MSCI World are much more than mere columns of numbers – they are regarded as barometers of economic stability and market sentiment.

Such indices serve private and institutional investors as a measuring tool for their investment strategies. They help companies see how they stack up against their competitors and assist policymakers as a sentiment barometer for economic developments.

Stock prices can also prove highly valuable within a company. This is especially true when employees have a vested interest in the company’s success – for example through stock options or bonus programs.

A rising stock price offers not only a financial benefit, but also serves as recognition. Employees can see concretely how their work contributes to the increase in value. That provides motivation, promotes identification, and can significantly increase employee engagement. 

A high stock price is more than a nice sight for the stockholders – it’s tangible capital. Companies can use their stocks as “currency” in order to finance strategic buybacks or to engage in international partnerships.

It even plays an important role in mergers and takeovers: A stable price level makes it possible to pay with a company’s own shares or to convince investors. Even in growth phases – for example when entering new markets – an attractive price creates room for negotiation and a positive reputation.