• Where the price is not determined by demand and supply forces.

    • If the price is not consistent with the activities of the firm e.g a decline in share price of a firm with very good growth prospects.

    • Price is not compatible with the price of other similar shares of firms in the same industry

    • If there is insider trading:

This situation arises where individuals within the firm in privileged positions e.g top management and director take advantage of the information available to them which has not been released to the public.

They may use such information to dispose off share to make capital gains or avoid capital loss

Example – where individuals (insiders) are aware that a firm has made a loss in a year and such information, if released to the public, would cause a crash on share price, the information may be leaked to certain people who could sell the shares in advance.