How does the value of preferred stocks behave compared to common stocks?

Preferred stocks generally exhibit behavior that keeps their market value close to par value, especially due to their fixed dividend payments. Unlike common stocks, which can experience significant fluctuations in value based on market conditions, company performance, and investor sentiment, preferred stocks have characteristics similar to bonds. They typically offer fixed dividends that provide a steady income stream to investors.

Because the dividends are set at a fixed rate, the value of preferred stocks tends to be more stable. Investors often prioritize the income generated from these dividends, leading to less volatility in the price of preferred shares compared to common shares. This stability is particularly noticeable during periods of market turbulence when common stocks may swing dramatically in response to broader economic indicators or company-specific news.

This behavior does not mean that preferred stocks don't experience any price movement; they can still fluctuate due to changes in interest rates or credit risk. However, the overall tendency is for their value to remain close to par, making them more predictable investments relative to common stocks.