Chapter Two: Financial markets

• Introduction
• Features of good Financial Market
• Organization of financial markets
• Financial Securities
• Stock Exchanges and their role
• Major Stock Markets/ exchanges
Introduction
• There are numerous components of financial systems.
These are: Institutions, markets, securities and
services.
• These components are continuously interacted with
complex investment process, which is affected by
different determinates.
• Financial markets deal with stocks, bonds, notes,
mortgages, and other claims on real assets, as well as
with derivative securities whose values are derived
from changes in the prices of other assets.
Introduction
• Securities market is a component of the wider
financial market where securities can be bought and
sold between subjects of the economy on the basis of
demand and supply.
• Security markets encompasses equity markets, bond
markets and derivatives.
• Securities markets can be split into two levels. Primary
markets, where new securities are issued and secondary
markets where existing securities can be bought and
sold. 
Introduction
A securities market is a system of interconnection between all
participants that provides effective conditions:
• to attract new and fresh capital by means of issuance new security
(securitization)
• to transfer real asset into financial asset,
• to invest money for short or long term periods with the aim of
deriving profitability.
• commercial function (to derive profit from operation on this
market)
• price determination (demand and supply balancing, the
continuous process of prices movements guarantees to state
correct price for each security so the market corrects mispriced
securities)
Introduction
• Informative function (market provides all participants with
market information about participants and traded instruments)
• regulation function (securities market creates the rules of
trade, contention regulation, priorities determination)
• Transfer of ownership (securities markets transfer existing
stocks and bonds from owners who no longer desire to
maintain their investments to buyers who wish to increase
those specific investments.
• Insurance (hedging) of operations though securities market
(options, futures, etc.)
 Introduction

• A market is the means through which buyers and sellers

are brought together to aid in the transfer of goods
and/or services.
• The market need not have a physical location and does
not necessarily own the goods or services involved.
• For a good market, ownership is not involved; the
important criterion is the smooth, cheap transfer of
goods and services.
• In most financial markets, those who establish and
administer the market do not own the assets but simply
provide a physical location or an electronic system that
allows potential buyers and sellers to interact.
 Introduction
• They help the market function by providing
information and facilities to aid in the transfer of
ownership.
• Market can deal in any variety of goods and services.
• For any commodity or service with a diverse
clientele, a market should evolve to aid in the transfer
of that commodity or service.
• Both buyers and sellers will benefit from the
existence of a smooth functioning market.
Introduction

• In general financial market brings buyers and sellers

together to aid in the transfer of financial instruments.
▫ Does not require a physical location.
▫ The market does not necessarily own the goods or services
involved.
▫ A market can deal in any variety of goods and services.
Characteristics of a Good Financial Market
• There are many financial markets, but they are not all
similar—some are active and liquid; others are
relatively illiquid and inefficient in their operations.
• One enters a market to buy or sell a good or service
quickly at a price justified by the prevailing supply and
demand.
• To determine the appropriate price, participants must
have timely and accurate information on the volume
and prices of past transactions and on all currently
outstanding bids and offers.
Characteristics of a Good Financial Market

The quality of a market can be evaluated in

terms of the following characteristics.

1. It provides timely & accurate information.

2.Provides Liquidity,
 Liquidity is the ability to buy or sell an asset
quickly and at a known price.
 liquidity requires marketability and price
continuity, which, in turn, requires depth.
Characteristics of a Good Financial Market
 Marketability: refers to likelihood of being sold
quickly. The expected price should be fairly certain,
based on the recent history of transaction prices and
current bid-ask quotes.
• price continuity: which means that prices do not
change much from one transaction to the next unless
substantial new information becomes available.
• Depth: which means that numerous potential buyers
and sellers must be willing to trade with securities
(Many participants)
Characteristics of a Good Financial Market
3. Low Transaction costs: Lower costs (as a percent of the value of the
trade) make for a more efficient market. Efficient market is defined as
one in which the cost of the transaction is minimal. This attribute is
referred to as internal efficiency.
4. Rapid adjustment to new information: Buyer or seller wants the
prevailing market price to adequately reflect all the information
available regarding supply and demand factors in the market.
• If such conditions change as a result of new information, the price
should change accordingly.
• Therefore, participants want prices to adjust quickly to new
information regarding supply or demand, which means that prices
reflect all available information about the asset.
• This attribute is referred to as external efficiency or informational
efficiency.
Characteristics of a Good Financial Market
In summary, a good market for goods and services has the following
characteristics:
• Timely and accurate information is available on the price and
volume of past transactions and the prevailing bid and ask prices.
• It is liquid, meaning an asset can be bought or sold quickly at a
price close to the prices for previous transactions (has price
continuity), assuming no new information has been received. In turn,
price continuity requires depth.
• Transactions entail low costs, including the cost of reaching the
market, the actual brokerage costs, and the cost of transferring the
asset.
• Prices rapidly adjust to new information; thus, the prevailing price is
fair because it reflects all available information regarding the asset.
Organization of the Securities Market
▫ People and organizations wanting to borrow money
are brought together with those having surplus
funds in the financial markets.
▫ These markets may have a physical location or may
exist only as computer networks
▫ Markets vary in types of securities that are traded and
in the way securities are traded
Organization of the Securities Market

• There are great many different financial markets in a developed

economy, each market deals with a somewhat different type of
instrument in terms of the instrument’s maturity and the assets
backing it.
• Different markets serve different types of customers, or operate in
different parts of the country.
• For these reasons, it is often useful to classify markets along
various dimensions:
• Security markets can be organized and classified in different forms.
Organization of the Security Market
Financial markets can be classified in to the
following:
• Money vs. Capital markets (Based on Maturity)
• Primary vs. Secondary markets (Based on
seasoning)
• Debt Vs equity market (nature of claims)
• Stock exchanges Vs. OTC (Base on fiscal place)
Organization of the Securities Market
Money vs. Capital markets.
• Money markets are the markets for short-term, highly
liquid debt securities like T-bills and commercial
papers.
• Capital markets are the markets for intermediate- or
long-term debt and corporate stocks.
• There is no hard and fast rule on this classification but
generally “short term” generally means less than one
year, “intermediate term” means one to five years, and
“long term” means more than five years.
Organization of the Securities Market
• Securities market can be further classified as Primary
markets and Secondary market
Primary Market
• The primary market is where new issues of bonds, preferred
stock, or common stock are sold by government units,
municipalities, or companies to acquire new capital.
• Market where new securities are sold and funds would go
directly to issuing unit.
• Primary markets are security markets where new issues of
securities are traded.
• It is also called New Issue Market (NIM)
• Trades on the primary market raise fresh capital for firms
 Organization of the Securities Market
• In primary market there are usually four methods to
issue the securities (specially bonds). These are
negotiation, private placement, public placement
and competitive bid.
• Negotiated sales: Involve contractual arrangements
between underwriters and issuers wherein the
underwriter helps the issuer prepare the bond issue
and set the price and has the exclusive right to sell the
issue.
Organization of the Securities Market

• Private placements: involve the sale of securities

issue by the issuer directly to an investor or a small
group of investors.
• Public Placement: involves the sale of issues by the
issuer directly to an investing public.
Organization of the Securities Market
• Competitive bid: Typically involve sealed bids and
securities are sold to the bidding syndicate of underwriters
that submits the bid with the lowest interest cost in
accordance with the stipulations set forth by the issuer.
• In most cases competitive bid require an underwriting
function, which means the investment firm purchases the
entire issue at a specified price, relieving the issuer from
the risk and responsibility of selling and distributing the
bonds.
• Subsequently, the underwriter sells the issue to the investing
public.
Organization of the Securities Market
The underwriting function can involve three services:
origination, risk bearing, and distribution.
• Origination: involves the design of the bond issue and
initial planning.
• Risk bearing: this function involves the underwriter to
acquire the total issue at a price dictated by the
competitive bid or through negotiation and accepts the
responsibility and risk of reselling it for more than the
purchase price.
• Distribution: means selling it to investors, typically
with the help of a selling syndicate that includes other
investment banking firms and/or commercial banks.
Organization of the Securities Market
New issues are typically divided into two groups:
(1) Seasoned equity issues and
(2) Initial public offerings (IPOs).
 Seasoned equity issues: are new shares offered by firms that
already have stock outstanding- This is sell of additional shares of
its common stock to the public at a price very close to the current
price of the firm’s stock. Existing shareholders may exercise
preemptive right

 Initial public offerings (IPOs): involve a firm selling its common

stock to the public for the first time. At the time of an IPO offering,
there is no existing public market for the stock, that is, the company
has been closely held. The purpose of the offering was to get
additional capital to expand its operations.
Organization of the Securities Market

• New issues (seasoned or IPOs) are typically

underwritten by investment bankers, who acquire the
total issue from the company and sell the securities to
interested investors.
• The underwriter gives advice to the corporation on
the general characteristics of the issue, its pricing,
and the timing of the offering.
• The underwriter also accepts the risk of selling the
new issue after acquiring it from the corporation.
Organization of the Securities Market

• Secondary markets
▫ A market where securities are resold between
investors.
▫ Market where outstanding stocks/securities are bought
and sold by investors.
▫ The issuing unit does not receive any funds in a
secondary market transaction i.e. Secondary market do
not serve to raise additional capital for firms.
▫ The trading in the secondary market is between
investors/security holders and involvement of the initial
issuer is limited except in some few occasions.
Organization of the Securities Market
• Secondary markets permit trading in outstanding
issues; that is, stocks or bonds already sold to the
public are traded between current and potential
owners.
• The proceeds from a sale in the secondary market do
not go to the issuing unit (the government,
municipality, or company) but, rather, to the current
owner of the security.
Organization of the Securities Market

How do you describe the relationship between

primary and secondary markets.

?
Organization of the Securities Market
• Because the secondary market involves the trading of
securities initially sold in the primary market, it provides
liquidity to the individuals who acquired these securities.
• After acquiring securities in the primary market,
investors may want to sell them again to acquire other
securities, buy a house, or go on a vacation etc.
• The primary market benefits greatly from the liquidity
provided by the secondary market because investors
would hesitate to acquire securities in the primary market
if they thought they could not subsequently sell them in
the secondary market.
Organization of the Securities Market
• That is, without an active secondary market, potential
issuers of stocks or bonds in the primary market
would have to provide a much higher rate of return to
compensate investors for the substantial liquidity
risk.
• Secondary markets are also important to those selling
seasoned securities because the prevailing market
price of the securities is determined by transactions in
the secondary market.
Organization of the Securities Market
• New issues of outstanding stocks or bonds to be sold
in the primary market are based on prices and yields
in the secondary market.
• Even forthcoming IPOs are priced based on the prices
and values of comparable stocks or bonds in the
public secondary market.
Organization of the Securities Market
• In general, though the secondary market does not
serve to raise fresh capital to the issuer, it is still
important for the following reasons:
1. Provides liquidity to investors who acquire
securities in the primary market.
2. Lower required returns because of lower liquidity
risk.
3. Helps in pricing the new issues.
Organization of the Securities Market
Debt Vs Equity market:
▫ Debt market: is a market where debt instruments are
traded (eg Gov’t securities like treasury bill, treasury notes
and treasury bonds) corporate securities like commercial
papers, commercial notes, corporate bonds. Deb market
can be either money market or capital market depending on
the maturity of the instrument being traded
▫ Equity market: is a market where equity instrument like
common stock and preferred stock are traded. All equity
market instruments are capital market instruments.
 There is no as such short term equity instrument.
Organization of the Securities Market
Spot vs. Futures markets.
• Spot markets: are markets in which assets are
bought or sold for “on-the-spot” delivery (literally,
within a few days).
• Futures markets: are markets in which participants
agree today to buy or sell an asset at some future
date. This is a market for futures and options
Organization of the Securities Market
Stock Exchanges Vs. OTC (Over the counter)
• Stock exchanges: are physical location for trading.
• They are formal organizations with specific members and
specific securities (stocks or bonds) that have qualified for
listing.
• Although the exchanges typically consider similar factors
when evaluating firms that apply for listing, the level of
requirement differs (the national exchanges have more
stringent requirements).
• The Trading functions with members who own a seat on the
exchange.
• Stock traded on exchange are listed stocks
Organization of the Securities Market
Over the counter (OTC) markets
• Over the counter communication are electronic
network of dealers all over the world.
• Over-the-counter (OTC) market, involves trading in
stocks not listed on an organized exchange.
Organization of the Securities Market
Trading Systems in stock exchanges: There are two
major trading systems, and an exchange can use one
of these or a combination of them.
• Pure auction market: in which interested buyers and
sellers submit bid and ask prices for a given stock to
a central location where the orders are matched by a
broker who does not own the stock but who acts as a
facilitating agent. Participants refer to this system as
price-driven because shares of stock are sold to the
investor with the highest bid price and bought from
the seller with the lowest offering price
Organization of the Securities Market
• Dealer market: where individual dealers provide
liquidity for investors by buying and selling the
shares of stock for themselves.
• Ideally, with this system there will be numerous
dealers who will compete against each other to
provide the highest bid prices when you are selling
and the lowest asking price when you are buying
stock
Organization of the Securities Market
• Beyond the alternative trading systems for equities,
the operation of exchanges can differ in terms of
when and how the stocks are traded. It can be either
Call or Continuous market
▫ In a call market trading takes place at a specified
time intervals. Some call markets have a provision
that limits movement from the prior price. This is
to prevent a temporary order imbalance from
dramatically moving the price.
▫ Call markets make themselves more orderly and
less volatile.
Organization of the Securities Market
• In a continuous market there is trading at all times the
market is open.
• In a continuous market, trades occur at any time the
market is open, priced by auction or by dealers.
 Financial Securities

• Financial Securities are financial instruments traded

in the financial markets. Various types of securities
are traded in the market.
• Securities are classified on the basis of return and the
source of issue.
• On the basis of return or income, securities may be
classified as fixed or variable income securities.
• In the case of fixed income securities, the income is
fixed at the time of issue itself. Bonds, debentures,
preference shares fall into this category.
 Financial Securities
• In the case of variable income securities, the income
of securities vary from time to time.
• Common shares are typical examples of variable
income securities.
• By sources of issuer, securities may be classified as
government, semi government or corporate securities.
 Financial Securities
• Describe the features of equity shares, identify the
merit and demerits of investing in common stocks.
• Describe the features of preferred stock, their
classification, and identify advantages and
disadvantages of investing in preferred stocks.
• Describe the features of bonds, their
classification, and identify advantages and
disadvantages of investing in bonds.
 Stock exchanges
• Stock Exchange (also called Stock Market or Share
Market) is one important constituent of Capital
market.
• Stock Exchange is an organized market for the
purchase and sale of industrial and financial security.
• It is convenient place where trading in securities is
conducted in systematic manner i.e. as per certain
rules and regulations.
• It performs various functions and offers useful
services to investors and borrowing companies.
 Stock exchanges
• Stock exchanges is a market in which securities are
bought and sold out as per certain well-defined rules
and regulations.
• Stock exchange is a form of exchange which provides
services for stock brokers and traders to buy or sell
stocks, bonds, and other securities.
• Stock exchange is an organized and regulated
financial market where securities (bonds, notes,
shares) are bought and sold.
 Stock exchanges
• Stock exchanges are indispensable for the smooth and
orderly functioning of corporate sector in a free market
economy.
• A stock exchange need not be treated as a place for
speculation or a gambling.
• It should act as a place for safe and profitable
investment, for this, effective control on the working of
stock exchange is necessary.
• This will avoid misuse of this platform for excessive
speculation, scams and other undesirable and anti-
social activities.
 Role of Stock exchanges
• Stock exchanges are mostly secondary markets with
regulatory and supervisory agency.
• Stock regulatory agency has the mission to promote and
maintain fair, efficient , secure and transparent market and to
facilitate the orderly development of the stock exchange.
• Stock exchanges are established for the purpose of assisting,
regulating and controlling business of buying, selling and
dealing in securities.
• Stock exchanges provide a market for the trading of securities
to individuals and organizations seeking to invest their saving
or excess funds through the purchase of securities
Role of Stock exchanges
• Provides a physical location for buying and
selling securities that have been listed for
trading on that exchange.
• Establishes rules for fair trading practices and
regulates the trading activities of its members
according to those rules.
• The exchange itself does not buy or sell the
securities, nor does it set prices for them.
• The exchange assures that no investor will have
an undue advantage over other market
participants
Features of Stock Exchange
• Market for securities : Stock exchange is a market,
where securities of corporate bodies, government and
semi-government bodies are bought and sold.
• Deals in second hand securities : It deals with
shares, debentures bonds and such securities already
issued by the companies. In short it deals with
existing or second hand securities and hence it is
called secondary market.
 Features of Stock Exchange
• Regulates trade in securities : Stock exchange does not buy or
sell any securities on its own account. It merely provides the
necessary infrastructure and facilities for trade in securities to its
members and brokers who trade in securities. It regulates the
trade activities so as to ensure free and fair trade
• Allows dealings only in listed securities : In fact, stock
exchanges maintain an official list of securities that could be
purchased and sold on its floor. Securities which do not figure in
the official list of stock exchange are called unlisted securities.
Such unlisted securities cannot be traded in the stock exchange.
Features of Stock Exchange
• Transactions effected only through members : All the transactions
in securities at the stock exchange are effected only through its
authorized brokers and members. Outsiders or direct investors are not
allowed to enter in the trading circles of the stock exchange. Investors
have to buy or sell the securities at the stock exchange through the
authorized brokers only.
• Association of persons : A stock exchange is an association of
persons or body of individuals.
• Recognition from Central Government : Stock exchange is an
organized market. It requires recognition from the Central
Government.
• Working as per rules : Buying and selling transactions in securities at
the stock exchange are governed by the rules and regulations of SEC
(in USA) and SEBI (in India)
Features of Stock Exchange
• Specific location: Stock exchange is a particular market
place where authorized brokers come together daily (i.e. on
working days) on the floor of market called trading circles
and conduct trading activities. The prices of different
securities traded are shown on electronic boards. After the
working hours market is closed. All the working of stock
exchanges is conducted and controlled through computers
and electronic system.
• Financial Barometers: Stock exchanges are the financial
barometers and development indicators of national
economy of the country. Industrial growth and stability is
reflected in the index of stock exchange.
Services given by Stock Exchange

• Provides liquidity to investment : Stock exchange provides

liquidity (i.e. easy convertibility to cash) to investment in securities.
An investor can sell his securities at any time because of the ready
market provided by the stock exchange. Stock exchange provides
easy marketability to corporate securities.
• Provides collateral value to securities : Stock exchange provides
better value to securities as collateral for a loan. This facilitates
borrowing from a bank against securities on easy terms.
• Offers opportunity to participate in the industrial growth : Stock
exchange provides capital for industrial growth. It enables an
investor to participate in the industrial development of the country.
Services given by Stock Exchange

• Estimates the worth of securities : Stock exchange

provides the facility of knowing the worth (i.e. true market
value) of investment due to quotations (i.e. price list) and
reports published regularly by the exchange. This type of
information guides investors as regards their future
investments. They can purchase or sell securities as per the
price trends (i.e. latest price value) in the market.
• Offers safety in corporate investment : An investor can
invest his surplus money (i.e. extra money) in the listed
securities with reasonable safety.
Top Global stock exchanges in the world by
market capitalization in 2013.
• New York Stock Exchange (NYSE)
• NASDAQ
• Tokyo Stock Exchange
• London Stock Exchange
• Shanghai Stock Exchange
•  Hong Kong Stock Exchange
• Toronto Stock Exchange 
 Top Global stock exchanges
1. New York Stock Exchange (NYSE) 
. Headquartered in New York City. Market capitalization of
$14,242 Billions and Trade Value $20,161Billions.
• The New York Stock Exchange (NYSE), the largest
organized securities market in the United States, was
established in 1817 as the New York Stock and Exchange
Board. The name was changed to the New York Stock
Exchange in 1863.
• NYSE is the premier listing venue for the world’s leading
large- and medium-sized companies.
• Featuring more than 8000 listed issues it includes 90% of
the Dow Jones Industrial Average and 82% of the S&P 500
stock market indexes volume.
Top Global stock exchanges
2. NASDAQ - Headquartered in New York City. Market
Capitalization (2011, USD Billions) - 4,687; Trade Value (2011,
USD Billions) – 13,552.
• Second largest stock exchange in the world by market
capitalization and trade value. The exchange is owned by
NASDAQ OMX Group which also owns and operates 24
markets, 3 clearinghouses and 5 central securities depositories
supporting equities, options, fixed invome, derivatives,
commodities, futures and structured products. It is a home to
approximately 3,400 listed companies and its main index is the
NASDAQ Composite, which has been published since its
inception. Stock market is also followed by S&P 500 index.
Top Global stock exchanges
3. Tokyo Stock Exchange - Headquartered in Tokyo. Market Capitalization
(2011, USD Billions) – 3,325; Trade Value (2011, USD Billions) – 3,972.
• Third largest stock exchange market in the world by aggregate market
capitalization of its listed companies. It had 2,292 companies which are
separated into the First Section for large companies, the Second Section for
mid-sized companies, and the Mothers section for high growth startup
companies. The main indices tracking Tokyo Stock Exchange are the
Nikkei 225 index of companies selected by the Nihon Keizai Shimbun, the
TOPIX index based on the share prices of First Section companies, and the
J30 index of large industrial companies. 94 domestic and 10 foreign
securities companies participate in TSE trading. The London Stock
Exchange and the Tokyo Stock Exchange are developing jointly traded
products and share technology
Top Global stock exchanges
4.  London Stock Exchange - Headquartered in London. Market Capitalization
(2011, USD Billions) – 3,266; Trade Value (2011, USD Billions) – 2,871.
• Located in London City, it is the oldest and fourth-largest stock exchange in
the world. The Exchange was founded in 1801 and its current premises are
situated in Paternoster Square close to St Paul’s Cathedral. It is the most
international of all the world’s stock exchanges, with around 3,000 companies
from over 70 countries admitted to trading on its markets. The London Stock
Exchange runs several markets for listing, giving an opportunity for different
sized companies to list. For the biggest companies exists the Premium Listed
Main Market, while in terms of smaller SME’s the Stock Exchange operates
the Alternative Investment Market and for international companies that fall
outside the EU, it operates the Depository Receipt scheme as a way of listing
and raising capital.
Top Global stock exchanges
5. Shanghai Stock Exchange - Headquartered in Shanghai. Market
Capitalization (2011, USD Billions) – 2,357; Trade Value (2011,
USD Billions) – 3,658.
• It is the world’s 5th largest stock market by market capitalization and
one of the two stock exchanges operating independently in the
People’s Republic of China. Unlike the Hong Kong Stock Exchange,
the SSE is not entirely open to foreign investors. The main reason is
tight capital account controls by Chinese authorities. The securities
listed at the SSE include the three main categories of stocks, bonds,
and funds. Bonds traded on SSE include treasury bonds, corporate
bonds, and convertible corporate bonds. The largest company in SSE
is PetroChina (market value – 3,656.20 billion).
Top Global stock exchanges
6.  Hong Kong Stock Exchange - Headquartered in Hong
Kong. Market Capitalization (2011, USD Billions) – 2,258;
Trade Value (2011, USD Billions) – 1,447.
• It is the third largest stock exchange in Asia and the sixth
largest in the world in terms of market capitalization. Hong
Kong Stock Exchange (SEHK) has about 1,477 listed
companies and it operates securities market and a derivatives
market in Hong Kong and the clearing houses for those
markets. The three largest stocks by market capitalisation in
Hong Kong Stock Exchange are PetroChina, Industrial &
Commercial Bank of China, and China Mobile.
Top Global Stock exchanges
7.  Toronto Stock Exchange - Headquartered in Toronto. Market
Capitalization (2011, USD Billions) – 1,912; Trade Value (2011, USD
Billions) – 1,542.
• It is the largest stock exchange in Canada and the third largest in North
America. Toronto Stock Exchange is owned by and operated as a
subsidiary of the TMX Group for the trading of senior equities. A broad
range of businesses from Canada, the United States, Europe, and other
countries are represented on the exchange. The exchange lists
conventional securities, exchange-traded funds, split share corporations,
income trusts and investment funds. Toronto Stock Exchange is the
leader in the mining and oil & gas sector, including such companies like
Cameco Corporation, Canadian Natural Resources Ltd., EnCana
Corporation, Husky Energy Inc., Imperial Oil Ltd., and others.
Stock exchanges in Africa
• There are 29 exchanges in Africa, representing 38
nations' capital markets.
List of African stock exchanges
 Group Assignments
1. Take into consideration the Ethiopian financial system ()
 Describe the evolution and development of the Ethiopian
financial system (during imperial regime, socialist regime and
current regime) in terms of its components, products and
services in each of the above three regimes.
 Compare and contrast its components, products and services
with those of developed financial systems and evaluate the
missing elements in terms of its components/products/
services and
 Taking into consideration the current global and socio-
economic environment, propose the new elements/products/
services that shall be introduced in Ethiopian financial
systems (adequately justify the feasibility at the moment.
 Group Assignments
2. Many argue that Ethiopia needs to introduce formal stock market at
the moment through which companies raise capital for investment, but
the Government doesn’t look enthusiastic in helping the establishment
of this market. ()
 Critically evaluate the need for establishing stock exchange and
present at least five strong reasons that helps to convince the Ethiopian
government in establishing stock exchange (relate your justification to
local and global business & economic environment)
 By exploring the experience of other stock exchanges, who should take
the lead in Establishing Ethiopia's Stock Exchange and how shall it be
established. (Here present at least the experience of five stock
exchanges)
 Propose the pre-requisites for establishing stock exchanges
Group Assignmen
3. Consider the Ethiopian Investment policy. ()
Critically evaluate and narrate it
Compare and contrast with at least three African
countries
Is Ethiopia more favorable for investment compared to
African countries you compared with.
Identify policy elements that you think will not benefit to
Ethiopia with justification
(not more than 10 pages)
Date of submission:
End of Chapter Two