The Significance of After-Market Stock Prices

Stock prices can continue changing even when the markets close.

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Tracking stock prices is one way to determine the value of your investment. For most investors stock is a long-term commitment, so checking the share price every day isn't necessary. But in some cases, investors buy stock for short periods of time. This gives special meaning to changes in share price after the market has closed, which typically indicate how the stock will behave the next day and what is happening at stock exchanges overseas.

After-Hours Trading

Stock is typically bought and sold on a stock exchange, which has special rules, regulations and hours of operation. However, this doesn't mean that when the stock exchanges close all trading must also stop. After-hours, or after-market, trading refers to stock purchases and sales that occur between the time a stock exchange closes and the time it reopens on the morning of the following business day. Since trading still occurs, the share price can go up or down after hours, depending on what buyers are willing to pay and how much sellers are willing to accept.

Breaking News

News on a company's performance or operations is one of the significant facts reflected in after-market stock prices. This news may concern the company that issued the stock or the economy in general. Investors who participate in after-market trading are usually willing to make transactions quickly in response to news. Changes in after-market stock prices show how investors feel about earnings reports from the company, bulletins from government financial agencies or stock market activity in other countries around the world where exchanges are open and trading is currently taking place.

Price Quotes

After-market stock prices may indicate the lack of access to price quotes. During the day, the stock exchange tracks the most recent sale prices for each stock. These are the rapidly changing prices that investors and analysts can see on a stock ticker. After the market closes, the electronic networks that facilitate trading provide their own quotes, which may be less up-to-date than daytime price quotes. After-market stock prices differ significantly from daytime prices since they reflect investors' reactions to the limited information they have to analyze and act on.

Volume and Traders

Unlike stock prices during the day, after-market prices are controlled by only a small number of traders. Traders must have access to electronic networks to participate in after-market trading. This means that many of the investors who might otherwise offer more or be willing to sell for less aren't involved in the process. The lower supply and demand for shares can impact after-market prices, but they may change quickly the next day once the market reopens and many more investors are able to participate.