Stock and Bond

Market
Group 1/ Section A members:
Shirlyn F. Casido
Sarah Jane R. Kintao
Laica May B. Macanip
Wilvie Miras

Rr text here
 STOCK
MARKET 2
What is a stock?
- A stock is also known as equity. It is a security that represents the
ownership of a fraction of a corporation.

TWO MAIN TYPES OF STOCK:

1. COMMON STOCK
- usually entitles the owner to vote at shareholder’s meetings and to
receive any dividends paid out by the corporation.

2. PREFERRED STOCK
- gives no voting rights to shareholders.

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 Stock Market
- Refers to the collection of exchanges and other venues where the buying, selling, and
issuance of shares of publicly held companies take place.
- Are vital components of a free- market economy because they enable democratized
access to trading and exchange of capital for investors of all kinds.

HOW THE STOCK MARKET WORKS?

The Stock Market act as:
1. Primary Markets
- the stock market allows companies to issue and sell their shares to the common
public for the first time through the process of an Initial Public Offering (IPO).
2. Secondary Markets
- is where investors buy and sell securities they already own.

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FUNCTIONS OF A STOCK MARKET:
 Fair dealing in securities transaction
 Efficient price discovery
 Liquidity maintenance
 Security and validity of transactions
 Support all eligible types of market participants
 Investor protection
 Balance regulation

REGULATING THE STOCK MARKET

- A local financial regulator or competent monetary authority of
institute is assigned the task of regulating the stock market.
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 STOCK MARKET PARTICIPANTS:
1. STOCK BROKERS
- also known as registered
representatives.
- are licensed professionals who
buy and sell securities on behalf of
investors.
2. PORTFOLIO MANAGERS
- are professionals who invest
portfolios, or collections of securities for
clients.
3. CUSTODIAN AND DEPOT
SERVICE PROVIDERS
- are institutions that hold on to
customer’s securities for safe keeping to
minimize the risk of their theft or loss.
4. INVESTMENT BANKERS
- represent companies in various
capacities, such as private companies
that want to go public via an IPO or
companies that are involved in pending
mergers and acquisitions.
5. MARKET MAKERS
- are broker- dealers who facilitate
the trading of shares by posting bid and
ask prices and maintaining an inventory
and shares.
6. SPECULATORS
- engage in directional bets in the
market with individual stocks or broader
indexes.
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7. ARBITRAGEUR
- are traders who identify mispricing in the market for relatively
low- risk profit.
8. STOCK EXCHANGES
- operate as for profit institutes and charge a fee for their services.

COMPETITION FACED BY STOCK

MARKET
◦ Dark Pools
◦ Block chains Ventures
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 BOND
MARKET
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What is a bond? Characteristics of bonds:
- ◦ Face value
It is a fixed- income
instrument that represents ◦ The coupon rate
a loan made by an ◦ Coupon dates
investor to a borrower. ◦ The maturity date
- Are units of corporate ◦ The issue price
debt issued by companies
and securitized as trade
able assets

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What is a Bond Market?
- Is the collective name given to all trades and issues of
debt securities.
- A marketplace where investors buy debt securities that
are brought to the market by either govern mental
entities.
Two different silos:
1. Primary market- frequently referred to as “new
issues” market in which transaction strictly occur
directly between the bond issuers and the bond
buyers.
2. Secondary market- securities that have already
been sold in the primary market are then bought
and sold at later dates.
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History of Bond Markets:
◦ Bonds have been traded for longer than stocks have.
◦ Recorded debt instruments history back to 2400 B.C, for instance via a clay
tablet discovered at Nippur, now present- day Iraq.
◦ In the middle ages, governments began issuing sovereign debts in order to
fund wars.
◦ Corporate bond market is also quite old. Early chartered corporations such
as the Dutch East India Company (VOC) and the MISSISSIPPI Company
issued debt instruments before they issued stocks.

Types of Bond Market:

1. Corporate Bonds- are typically classified as either investment- grade or else high- yield
(or junk). This categorization is based on the credit rating assigned to the bond and its issuer.
2. Government Bonds- National- issued government bonds(or sovereign bonds) entice
buyers by paying out the face value listed on the bond certificate .

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3. Municipal bonds- commonly abbreviated as “muni” bonds,
are locally issued by states , cities, special- purpose districts,
public utility districts, school districts, publicly- owned airports
and seaports, and other government- owned entities who seek to
raise cash to fund various projects.
4. Mortgage- backed bonds- is a type of asset- backed
security.
5. Emerging market bond- bonds issued by governments and
companies located in emerging market economies.
6. Bond indices- track and measure corporate bond portfolio
performance.

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 Bond Market vs. Stock Market
BOND MARKET
- Represent debt financing
- Are a form of credit, whereby
the borrower (bond issuer) must
repay the bond’s owners’
principal plus additional interest
along the way.
- Typically less risky
- Tend to be sensitive to interest
rate changes , with their prices
varying inversely to interest rate
move.
STOCK MARKET
- Represent equity financing
- Do not entitle the shareholder to
any return of capital, nor must
pay interest.
- Inherently riskier
- More sensitive to changes in
future profitability and growth
potential.
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 Advantages and Disadvantages of Bond Market
Pros
◦ Tend to be less risky and less
volatile than stocks.
◦ Wide universe of issuers and
bond types to choose from.
◦ The corporate and government
bond markets are among the
most liquid and active in the
world.
◦ Bondholders have preference
over shareholders in the event of
bankruptcy.
Cons
- Lower risk translates to lower
return, on average.
- Buying bonds directly may be
less accessible for ordinary
investors.
- Exposure to both debit (default)
risk as well as interest rate risk.
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 References:
https://www.investopedia.com/terms/s/stoc
kmarket.asp
https://www.investopedia.com/terms/b/
bondmarket.asp

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