Began in October 2008 the stock market in the world is estimated at about $ 36.6 trillion size. It is estimated that about 791 trillion face or nominal value of 11 times the size of the entire world economy of the world derivatives market. The value of the derivatives market, because it is in nominal values that are not directly comparable, stocks or fixed income security, traditionally refers to the actual value. In addition, the vast majority of derivatives "cancel" each other (ie, derivative "bet" on the events is similar to the derivative "bet" to offset the event did not occur). Many such relatively illiquid securities in value as a marker pattern, rather than the actual market price.
Stock Exchange listed stocks and listed stocks and equity mutual organizations to bring business buyers and sellers of professional organizations, entities, companies or mutual trade. Largest stock market in the United States, by market capitalization, is in the New York Stock Exchange (NYSE). In Canada, the largest stock market in the Toronto Stock Exchange. The main examples include Euronext Amsterdam Stock Exchange, London Stock Exchange, Paris Stock Exchange, Deutsche Börse (Frankfurt Stock Exchange). Examples include: In Africa, Nigeria Stock Exchange, Johannesburg Co., Ltd. and other Asian examples include the Singapore Exchange, Tokyo Stock Exchange, the Hong Kong Stock Exchange, Shanghai Stock Exchange, Bombay Stock Exchange. In Latin America, there is such exchanges, the BM & F Bovespa index and the BMV.
Transaction
The participants in the stock market range from small individual stock investors to large hedge fund traders, can be based anywhere. Their orders to buy or sell a stock exchange generally the order of execution, whose professional.
Some of the stock exchange's trading floor open outcry method is called, the physical location. This type of auction is in stock and commodity exchanges, traders may enter "verbal" bids and offers simultaneously. Another type of stock exchange is a virtual class, the electronics industry through the computer network of traders.
Model of the actual auction market trading, one potential buyer's bid for a specific stock price and a potential seller requires a specific stock price basis.
New York Stock Exchange is a physical exchange, also known as a listed exchange - only stocks listed on the exchange can be traded. Orders into the exchange members and flow down to floor the way brokers, who trade in order to go to college after the stock-exchange transaction. The work of experts is the use of open outcry to match buy and sell orders. If communication exists, no trade will occur immediately, in this case, the expert should be used / her own resources (funds or stocks), closed, his / her time to judge the difference. Once the trade has been made in the details of the report, "tape" and sent back to the brokerage firm, and then notice the order of investors. While in the process of contact between people there is a significant amount of play on the computer, especially for so-called "program trading" an important role.
NASDAQ is a virtual exchange, all transactions are done through computer networks. This process is similar to the New York Stock Exchange. However, buyers and sellers, e-match. One or more NASDAQ market makers will always provide a bid and offer prices, they will buy or sell their stock
Paris Stock Exchange, now part of Euronext, is to drive, the electronic stock exchange. This is the end of the 1980s automation. Before the 1980s, which consists of open-outcry trading. Brokerage house trading floors or Brongniart meeting. In 1986, the cat trading system that in order to match the process is fully automated.
Market participants
The first few years, worldwide, buyers and sellers are individual investors, such as wealthy businessmen, usually with a long family history, especially the company. Over time, the market has become more "institutionalized", buyers and sellers are mainly institutions (such as pension funds, insurance companies, mutual funds, index funds, exchange-traded funds, hedge funds, investment groups, banks and other financial institutions).
History
Bombay Stock Exchange was founded in 1875, is Asia's first stock exchange
In the 12th century French courratiers de change and agricultural community representatives concerned about the bank's debt management and norms. Because these people deal with debt, they can be called the first brokers. A common misbelief is that in the late 13th century Bruges commodity traders gathered inside a man called Van der Beurze house, in 1309 they became "Brugse Beurse", institutionalized what, until then, an informal meeting, But in fact, the family van der Beurze these gatherings took place in Antwerp building; [6], van der Beurze Antwerp as their main trading place, as most of the business during this period,. The idea quickly spread all over Flanders and neighboring counties and "Beurzen" opened in Brussels and Amsterdam.
In the mid-13th century, Venetian bankers began to trade in government securities. 1351, Venetian government outlawed spreading rumors intended to lower the price of government funds. In the 14th century, in Pisa, Genoa, Verona and Florence, bankers began trading in government securities. This is the only possible because these are from the Duke University, but an influential citizen of independent city-state Council of the rule. Italian company for the first time shares. England and the Low Countries in the company then in the 16th century.
The importance of the stock market
Function and purpose
The stock market is to raise funds for the enterprise one of the most important source. This makes the company publicly traded on the open market or increase in the sale of the company's ownership of the shares of other financial capital expansion. Exchange to provide liquidity to enable investors to quickly and easily sell securities capability. This is an attractive investment characteristics of stocks, and less liquid, such as real estate investment.
History has proven that the prices of stocks and other assets, economic activity is an important part of the dynamics and can influence or an indicator of social mood. Rising stock market is considered the economic situation and future economy. In fact, the stock market is often considered a country's economic strength and development of key indicators.
For example, stock prices tend to increase business investment and vice versa. Stock price will also affect families and their consumption of wealth. Therefore, the central bank's control and often act on the stock market to keep the eyes and the smooth operation of financial system functions, in general, of. Financial stability is the central bank's raison d'etre.
Exchange can be used as a clearinghouse for each transaction, which means they collect and share, and to ensure the safety of the seller to pay. This eliminates the individual counterparty may default risk of the buyer or seller.
Stock of the relationship between modern financial system
In most Western countries the financial system has undergone significant changes. A feature of this development is disintermediation. Participate in savings and financing part of the funds directly into the financial markets, rather than through traditional bank loans and deposits route. The general public's heightened interest, directly or through mutual funds investments in the stock market has always been an important part of this process.
Statistics show that in recent decades shares have been increasing in many countries, the proportion of household financial assets. In the 1970s, in Sweden, deposit accounts and other current assets less the risk, nearly 60 percent of household financial wealth than in the early 2000s to less than 20%. The portfolio of financial assets an important part of the adjustment has a direct stake, but a good deal of the institutional investment community of individuals, for example, pension funds, mutual funds, hedge funds, insurance companies invest the premiums and other forms.
The behavior of stock market
From past experience, we know that investors may "temporarily" move away from its long-term financial price total price "trend." (Positive or upward trend is called a bull market; negative or downward trend known as the bear market), may over-react to it, over-optimistic (excited) may push the price inappropriate or excessive pessimism may drive prices too low. The financial markets is "normal" high-economists continue to debate.
According to the efficient market hypothesis (EMH) for an explanation, the only change in the fundamentals, such as profit, profit or dividend prospects, should go beyond short-term impact on stock prices, in the random system "noise" may prevail. (However, this is largely an academic point of view the theory is called "hard" efficient market hypothesis also predicts little or no trading should take place, contrary to fact, because the price is at or near equilibrium, the price All public knowledge). "Hard" efficient market hypothesis is the stock market crash events such as a severe test, in 1987, when the Dow Jones index plummeted 22.6 percent, the largest ever in the United States one-day drop.
This event shows that stock prices can be substantially decreased, even this day, it is impossible to repair, generally agree on clear reasons: a thorough search, did not detect any "reasonable" development may account for the crash. (Note, however, the occurrence of such events is expected to strict, though rarely.) Seems to have been more general case, the expected number of price changes than a "random" is not new information arising from a period of fifty of the largest day's share price in the United States in the postwar period, changes in the research seems to confirm this.
However, the "soft" efficient market hypothesis appears unnecessary to maintain prices at or close to balance, but market participants from the market any moment, "inefficient" to the system profits. In addition, while the EMH predicts that all price changes, changes in the basic information about the case is random (ie non-trend), many studies have shown a marked tendency for the stock market more than a week or longer period of time trend. And other large, apparently non-random price changes have been introduced to various interpretations. For example, some studies have shown that the estimated changes in risk, and the use of certain strategies, such as stop-loss limits and risk limits the value, in theory, could lead to financial market overreaction. But it seems the best explanation is that stock market prices of non-Gaussian distribution (in this case, the efficient market hypothesis, any of its present form, will not be strictly applied).
Stock market, and any other business, is quite merciless amateurs. Inexperienced investors rarely get help, they need support. Running during the stock market crash in 1987, less than 1% of the analysts have been proposed sale (or even the bear market in 2000-2002, the average has not risen more than 5%). Running to 2000, the media amplified the general pleasure, and the rapid rise in stock price reporting and a lot of money, you can quickly make the so-called new economy stock market concept. (Enlarge come pessimistic 2000-2002 bear market, so the summer of 2002, the Dow Jones Industrial Average below the 5000 forecast is quite common.)
Irrational behavior
Sometimes, the market reaction seems irrational economic or financial news, even if the message is probably not the fundamental value of securities itself, the actual results. But this may be more practical, because such information often has been expected, counterreaction may occur, if the news is better (or worse) than expected. Therefore, the stock market may swing in both directions, press releases, rumors, euphoria and mass panic, but generally simply, for more experienced investors (especially hedge funds) quickly rebounded, even if it is a little bit of a moment of hysterical edge.
In the short term, stocks and other securities can be battered or support any number of fast market-changing events, so difficult to predict stock market behavior.
Crash
Robert Shiller's plot of the actual S & P composite price index, earnings, dividends, interest rates, from irrational exuberance ", 2D version. Shearer warned that in this version of the preface," the stock market did not fall back to historical levels of earnings as I define it in this book is still as of this writing [2005], in the mid-1920s, well above the historical average ... People still place too much confidence in the market, there is too strong beliefs, concerns about its investments so that they can swing one day become rich, so they do not prepare may be the result of a bad conservative. "
Robert Shiller price-earnings ratio as a predictor of the plot (Figure 10.1, source)-based 20-year rate of return. Horizontal S & P Composite Stock Price Index Irrational Exuberance "(first 10 years the average inflation-adjusted share of proceeds of inflation-adjusted prices) the actual price-earnings ratio. Vertical axis shows the geometric mean of the actual Standard & Poor's composite stock price index , dividend reinvestment, and sold 20 years after the investment return from 20 years of different color-coded data is the key to 10-year return. Shiller pointed out that this plot "confirms that long-term investors, investors submit all of their money to invest for 10 years, doing very well indeed, when prices began a decade of relatively low profitability. Long-term investors will be good advice, alone, to reduce its exposure to the stock market is high, because it has recently entered the market, it is low. "
Stock market crash is commonly defined as stocks in the Stock Exchange's share price fell sharply. In a variety of economic factors at the same time, the reason the stock market crash is also due to panic and lose confidence in the investing public. Typically, the stock market crash of the speculative bubble economy ended.
Has been well-known stock market has collapsed, billions of dollars in large-scale loss of wealth destruction over. More and more people play the stock market, especially since social security and retirement plans, are increasingly being privatized, with the stock and bond markets on the other elements.
As of the end of October, the Hong Kong stock market has fallen by 45.5%, Australia 41.8%, Spain 31%, UK 26.4%, United States 22.68%, and 22.5% in Canada. Black Monday in stock market history itself is the biggest one-day percentage decline - the Dow Jones fell in one day 22.6%. "Black Monday" and "Black Tuesday" of the name is also used on 28-29 October 1929, followed by terrible, which began Thursday in the 1929 stock market crash day.
Crash in 1987 made a number of problems - the main news and events did not predict a disaster and there is no visible cause of the collapse determined. This event of modern economics, many of the important assumption that the theory of rational human behavior, market equilibrium and market efficiency hypothesis into question. Some time after the collapse in the global exchange of trade was stopped, because the exchange of computer is not running, because at the same time, the industry received a huge number. This suspension, allowing the Federal Reserve and other central banks to take measures to control the spread of the global financial crisis. In the United States Securities and Exchange Commission launched a number of new measures to try to prevent a black Monday, "the incident, control access to the stock market.
Stock Index
In the market or price changes as part of the market price index stock market index, many of them, for example, Standard & Poor's, FTSE and Euronext indices captured. These indicators are usually market capitalization weighted index of stocks reflecting the weight of the contribution. The index composition is reviewed regularly to include / exclude stocks in order to reflect the changing business environment.
Derivatives
Financial innovation has brought many new pay off depends on the stock price or value of financial instruments. Some examples are exchange-traded fund (ETF), stock index and stock options, equity swaps, single stock futures, stock index futures. The last two may be traded on futures exchanges (which is different from the stock exchange, its history can be traced back to commodities futures exchanges), or trading desk. Because these products are only derived from stocks, they are sometimes considered to be a (hypothetical) derivatives market transactions, rather than the (hypothetical) stock market.
Leverage Strategies
Stock traders do not actually have to deal with short selling, buying on margin can be used to purchase stock with borrowed funds or derivative instruments can be used to control the amount of money the stock is much smaller than the direct purchase to be large or sales.
Sell short
In short selling, traders borrow stock (usually from his brokerage account holding customers' shares or its own shares, lend money to short), then on the market, hoping prices. The ultimate traders buy back stock, make money, if prices decline during this period and lost money, if it rises. Exit short positions through the repurchase of shares is known as "covered short positions." This strategy may also be illegal traders lack of liquidity or market volume was light, artificially reducing the price of the stock. Therefore, the majority of the market short selling can occur when and how to prevent short selling or location restrictions. The practice of naked shorting is illegal in most (but not all) of the stock market.
Buying on margin
Traders buying on margin, borrowing money (interest), buy stocks and hope that it will rise. Regulatory requirements in most industrialized countries, if a borrower is the stock from other traders on the basis of collateral with glory, it can be a maximum of those "certain percentage of the value of other stocks in the United States, margin requirements for many years has been 50% %, that is, if $ 1,000 investment, you need to put up $ 500, and there is often a maintenance margin below the $ 500.
Margin calls, if the total value of the investor's account can not support the industry's losses. (Value of the margin decline in the securities of additional funds, the account may be required to maintain the rights, and with or without notice to the margin account may be security or any other brokerage in order to protect the location of the sale of their loans, investors responsible for any of the following These shortages forced to sell.)
New releases
Global stocks and shares issued in 2004 related instruments totaled $ 50.5 billion, an increase of 29.8% in 2003's $ 38.9 billion or more. U.S. issuers of initial public offerings (IPOS) increased 221%, 233 products, raised $ 4.5 billion initial public offering in Europe, the Middle East and Africa (EMEA) from 90 to 3.9 billion U.S. dollars, up 333% .
Investment Strategy
People always want to know the stock market is one of many things, "How do I make money investing?" There are many different ways, either fundamental analysis or technical analysis of the two basic methods of classification. Fundamental analysis is the analysis of corporate financial statements, through the use of charts and quantitative techniques found in the market in the United States Securities and Exchange Commission filing, business trends, general economic conditions, etc. Technical analysis studies price actions, trying to predict price movements, regardless of the company's financial prospects. An example of a technology strategy is trend following method, John W · Henry and Ed Seykota, it uses the pricing model used is the use of strict financial management rooted in risk control and diversification.
Tax
According to many national or state legislation, a large array of financial obligations, for capital gains tax. Trading, the stock market dividends and capital gains tax is charged by the state, especially in the stock exchange. However, these financial obligations may be different from the jurisdiction of the jurisdiction, because, among other reasons, it can be assumed that the tax has been incorporated into stock prices, the company paid to the state through various taxes, or useful, tax-free stock market operations to promote economic growth.
No comments:
Post a Comment