Jay, proactive shareholder participation in the price movement of the stock is a relatively new phenomena. The fact that shareholders are becoming increasingly "restless" with the wild movements of a stock price is actually a function of increased communication, or knowledge among shareholders regarding the companies they own. Prior to 1991 most information was controlled through limited sources. Now, with the internet and other independent information sources (Bloomberg, etc.) shareholders have become more privy to share price movements (i.e., RSYS rising $3 points on 500K shares traded, 90% buying activity, and falling $3 points on 200K shares traded, 40% buying activity - obviously, the figures don't equal - although, we are told in "educational" circles that the buying and selling "eventually" will average out). Thus, it would take a total new paradigm of management functions/communication if management were to address the wild movements of their stock. Currently, I know of very few companies which have internal programs which address the movement of the price of their shares. It's time has come though.
Much of the movement of a stock price occurs to create volume, one way or the other. The greater the volume, the greater the reward for the trading desks. The trading desks get a percentage take on each share traded. To increase the number of shares traded a market maker will purposely take the opposite side of the movement of a stock price. The latter is done also to "protect" the liquidity of the market. Most European countries use a different trading/valuation system than does the U.S. which alleviates much of the volatility in a share, but, the arguement goes too that it has also tended to decrease the interest among Europeans in their stock markets. The axiom: increased volatility, increased interest; decreased volatility, decreased interest (ala free market). I do not agree with this axiom, but the rules are rules. So, you either join in the volatility through day trading, or, like Peter Lynch, buy and hold. |
