I was reading about the difference between preferred and common stock, and I noticed that the market value of preferred stock doesn’t normally increase the way the value of common stock does. Why is this? Is it because of the call option (if the company can redeem the preferred stock at any time for $x, it makes sense for the market value to not go much higher than $x)? What about stocks without a call option?
Most preferred stocks in the US are issued at $25 and they are callable in 5 years.
Preferred stocks are a hybrid of common stock and a bond. Because of the bond like nature (yield), they are affected by interest rates. As rates rise, preferred stocks drop and vice versa. Occasionally you might see a $25 preferred around $30 but that's more the exception rather than the rule.
So while they will fluctuate in price, why would anything issued at $25 and callable in 5 years for $25 behave anything like a common stock?