Question

The term "marginal investor" means an investor who is active in the market and would tend to buy a stock if its price fell and sell it if it rose, barring any new information coming out about the stock. It is the "marginal investor" who determines the actual stock price. a. True b. False

Answer 1

Answer: a. True

Explanation:

A marginal investor is a representative investor whose actions shows the belief of people who are currently trading in the stock market. The stock's price is determined majorly by the marginal investor. When the price of the stock falls, the marginal investor buys at a lower price and later sell it at a higher price when it rises. The marginal investor trades at the margin thereby setting the price. The marginal investor can influence on the pricing of its equity. You can't specifically tell who the marginal investor is in the stock market. The marginal investor can be institutional or individual. Marginal investors can be individuals inside a firm that own an equity that stands out or is significant within the firm.