• Market dynamics are the forces that impact prices and the behaviors of producers and consumers in an economy and can also impact any industry or government policy.
  • Market dynamics create pricing signals that result from a change in supply and demand.
  • Economic models cannot capture some dynamics such as human emotions which affect markets, increase market volatility, and create price signals.
  • Some market participants include small-to-intermediate traders who are not professionals and possess limited knowledge of the markets and the various events that can impact the market.

Effects of Market Dynamics on Securities Market