Are stock returns based on market wide returns? When there is no new news released about the specific company, prices still rise or fall based on the market. When would a stock's trajectory diverge from that of the market?


A company's performance is attributable to a mix of economy-wide (global and national) factors, industry-specific factors, and company-specific factors. The broader factors are sometimes expressed as "a rising tide lifts all boats". Thus, individual stocks tend to have a significant (but far from perfect) correlation with the broad market, and a stronger correlation with their own sector/industry. News about a company primarily affects that company's stock but is also aggregated as part of industry and market-wide information.

Another perspective on what drives stocks to perform similarly or differently is the Fama-French model.

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.