Professional Documents
Culture Documents
Securities of Byuing and Selling
Securities of Byuing and Selling
Securities of Byuing and Selling
Management
First Canadian Edition
What Is A Market?
Primary Capital Markets
Secondary Financial Markets
Classification of Secondary Equity Markets
Detailed Analysis of Exchange Markets
Uses of Security-Market Indices
Differentiating Factors
Bond Market Indices
Composite Stock-Bond Indices
Comparison of Indices Over Time
Copyright 2010 by Nelson Education Ltd. 4-2
What is a Market?
Primary markets
new securities are sold and funds go to issuing
unit
Secondary markets
outstanding securities are bought and sold by
investors
issuing unit does not receive any funds in a
secondary market transaction
The investment
banker purchases the
entire issue from the
issuer and resells the
security to the
investing public.
Negotiated
Most common
Full services of underwriter
Competitive bids
Corporation specifies securities offered
Lower costs
Reduced services of underwriter
Best-efforts
Investment banker acts as broker
Copyright 2010 by Nelson Education Ltd. 4-10
Primary Markets
Private Placements
These securities can subsequently be
traded among large sophisticated investors
Lower issuing costs than public offering
Regional Markets
Chicago, San Francisco, Boston, Osaka, Nagoya,
Dublin, Cincinnati
Provide trading facilities for local companies not large
enough to qualify for listing on national exchanges
Listing requirements are typically less stringent than
the national exchanges
List firms that also list in one of national exchanges to
give local brokers access to these securities
Primary Global
Tokyo Stock Exchange, London Stock Exchange,
Frankfurt Stock Exchange, and Paris Bourse
Trend toward consolidations or affiliations that will
provide more liquidity and greater economies of
scale to support technology required by investors
Strong international exchanges have made
possible a global equity market wherein stocks
that have a global constituency can be traded
around the world continuously, creating global
24-hour market.
Copyright 2010 by Nelson Education Ltd. 4-21
The NASDAQ Market
Listing Requirements
Two Lists
National Market System (NMS)
Regular NASDAQ
A company must meet all of the requirements
under at least one of the three listing standards
for initial listing and then meet at least one
continued listing standard to maintain its listing
on the NMS
A Margin Transaction
Total Stock Value ($60 X 200) $12,000
Less: Initial Margin (50% X $10,000) - $5,000
Equity in Trade ($12,000 - $5,000) $7,000
Equity Position (%) ($7,000 $12,000) 58%
The Sample
Size
Breadth
Source
Computational Procedure
Arithmetic average
Compute an index and have all changes,
whether in price or value, reported in
terms of the basic index
Geometric average
Index t
PQ t t
Beginning Index Value
PQ h h
where:
Index t = index value on day t
Pt = ending prices for stocks on day t
Qt = number of outstanding shares on day t
Ph = ending price for stocks on base day
Qh = number of outstanding shares on base day
Copyright 2010 by Nelson Education Ltd. 4-48
Calculating a Value-Weighted Index