Driver
What Is a Driver?
A driver is a factor that substantially affects the activity of another entity. Drivers influence change in their targets and happen at many levels of the economy and stock market. Macro drivers cause changes at the overall market level. Micro drivers cause change at the company level.
Grasping Drivers
Macro drivers influence large areas of the market at a time and often incorporate large, broadly clearing events like conflicts, trade agreements or other international events.
A micro driver is whatever might materially influence either a company's earnings or the price of its stock. Each company will have its own unique drivers, albeit probably the most common drivers incorporate the release of new products or services, new financing, commodity or resource prices, activities of contenders, legislation, regulation, and product diversification versus contenders. Micro drivers are most frequently employed in bottom-up analysis.
Stock-explicit drivers frequently have no pure quantitative units of measurement, however are more qualitative in nature like investor sentiment. Qualitative drivers are much of the time elusive and vague, making it more hard to collect and measure. All things considered, understanding individuals and company societies are central to any all encompassing analysis. Taking a gander at a company through the eyes of a customer and understanding its competitive advantage helps with grasping drivers of company achievement.
Macro-Economic Drivers
Macro drivers are a big area of interest for fund companies running top-down strategies, as they're frequently worried about what the global investment subjects will be throughout their time horizon. Fundamental investors might be more worried about micro drivers that influence the earnings and stock prices of the companies they are investigating. The best fundamental investors will distinguish the three or four key drivers for the stocks they own and follow the situation with those drivers strictly, realizing that they hold the key to the overall performance of the stock.
Instances of Drivers
An illustration of a macro driver may be a U.N. trade embargo on every one of the countries in Africa. This would influence a large portion of the market, as natural resources that emerge from Africa wouldn't have the option to arrive at their standard merchants. This would possibly adversely affect the industrials and materials sectors, as well as emerging markets stocks.
An illustration of a micro driver would be assuming a company like Coca-Cola acquired a large up-and-coming refreshment maker that was taking large parts of the total drink Coca-Cola market share. This might emphatically affect Coca-Cola stock and influence the stock price upwards. For a food merchant, similar to Albertson's, significant spaces are a large driver of company performance, while relative market share is less critical.
Features
- Micro drivers are fundamental factors that influence a company or area's bottom line, and is utilized in bottom-up analysis.
- A driver, in finance and economics, alludes to some key factor that impacts some outcome of interest.
- Macro drivers are compelling fiscal, natural, or international variables or events that extensively influence a regional or national economy, and are utilized in top-down analysis.
