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I get it that the price of a stock goes up and down as fresh news is released, positive or negative.

However, fresh news is released only at certain times while the price of a stock changes (by minute amounts) almost every second.

What is the cause for the price to fluctuate minute to minute without the input of any fresh news?

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4 Answers 4

up vote 10 down vote accepted

News about a company is not the only thing that affects its stock's price.

There is also supply and demand. That, of course, is influenced by news, but it is not the only actor. An insider, with a large position in their company's stock, may want to diversify his overall portfolio and thus need to sell a large amount of stock. That may be significant enough to increase supply and likely reduce the stock's price somewhat.

That brings me to another influence on stock price: perception. Executives, and other insiders with large positions in their company's stock, have to be careful about how and when they sell some of that stock as to not worry the markets. Many investors watch insider selling to gauge the health of the company.

Which brings me to another important point. There are many things that may be considered news which is material to a certain company and its stock. It is not just quarterly filings, earnings reports and such. There is also news related to competitors, news about the economy or a certain sector, news about some weather event that affects a major supplier, news about a major earthquake that will impact the economy of a nation which can then have knock-on effects to other economies, etc...

There are also a lot of investors with varying needs which will influence supply and demand. An institutional investor, needing to diversify, may reduce their position in a stock and thus increase supply enough that it impacts the stock's price. Meanwhile, individual investors will make their transactions at varying times during the day. In the aggregate, that may have significant impacts on supply and demand.

The overall point being that there are a lot of inputs and a lot of actors in a complicated system. Even if you focus just on news, there are many things that fall into that category. News does not come out at regular intervals and it does not necessarily spread evenly. That alone could make for a highly variable environment.

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In addition to what @George Marian said, a very large portion of trades are from computer programs trained to make trades when certain apparent patterns are observed. Since these programs are not all designed in the same way, much of the supply and demand is a result of different algorithms with different "opinions" on what the stock is doing.

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It's the buying and selling of the stock that causes the fluctuation in prices, not the news.

People buy and sell all the time, and not just for newsworthy reasons. They may have to send a child to college, or fix a roof, etc. Or they may be technical traders looking for signals. All kinds of reasons.

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Investors are "forever" comparing the prices of stocks to other stocks. As others have pointed out, this is done faster and more frequently nowadays with high-speed computer programs.

There may be no "fresh" news on stock A, but if there is fresh news on stock B (as there usually is), the news on B affects the COMPARISON with stock A. That could be what causes trading in stock A that has "no news."

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