Reviewed by Sep 30, 2020| Updated on
A driver, in the context of Economics, is a factor which affects another entity's activity in a material way. Drivers affect changes in their targets and occur at many economic and stock-market levels. Macro drivers are causing changes at the general level of the market. At the enterprise level, micro drivers cause the transition.
A micro driver is something that may impact either a company's earnings or its stock price in a material way. Each company has its own distinctive drivers, though some of the most common drivers include releasing new products/services, new financing, commodity or resource prices, competitor activities, legislation, regulation, and diversification of products versus competitors.
Stock drivers do not have pure quantitative measurement units but are of a more qualitative nature.
Macro drivers are a huge area of interest for fund firms running top-down methods since they are worried about what the global investment themes will be over their time scale. Fundamental investors may be more concerned with micro-drivers influencing the profits and stock prices of the companies they are analysing.
The greatest fundamental investors will religiously identify some three-four key drivers for the stocks they own and follow the status of those drivers, knowing they hold the key to the stock's overall performance.
An example of a micro driver would be if a business, such as Coca-Cola purchased a big up-and-coming beverage maker who stole large parts of the total market share of Coca-Cola beverages. This can have a positive effect on Coca-Cola stock and upward influence on the stock price. Broad margins are a great driver of company performance for a retailer, such as Albertson's, although relative market share is less important.