金融市场与机构ch10

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Stock Exchanges
Changes in technology • Online trading • Real-time quotes • Company information • Electronic Communications Networks (ECNs) Margin requirements • Specify amount of borrowed versus amount in cash
Hale Waihona Puke 11Stock Exchanges
Purchasing stock on margin • Borrow a portion of the funds from broker • Margin is the amount investor must put up • Magnifies returns (both good and bad) Short sales • Sell a stock before you buy • Stock is borrowed from another investor • If price goes down, you buy at lower price and return the borrowed shares
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Public Placement of Stock
Initial public offerings (IPOs) • First-time offering of shares to the public • Firm must provide information to public – Prospectus • Firm is assisted by a securities firm Performance of IPOs • Price generally rises on first day – Internet firms • Longer-term performance of IPOs is poor
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Corporate Monitoring of Firms in the Stock Market
Potential benefits of an acquisition Market for corporate control If price declines due to poor management: subject to possible takeover Barriers to corporate control Antitakeover amendments Poison pills Golden parachutes
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Stock Indexes
Dow Jones Industrial Average Price-weighted average 30 large U.S. firms Standard and Poor’s (S&P) 500 Value-weighted 500 large U.S. firms New York Stock Exchange Indexes Other Stock Indexes Amex, NASDAQ
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Stock Exchanges
Organized exchanges Execute secondary market transactions Examples: NYSE, AMEX, Midwest, Pacific NYSE is largest, controlling 80 percent of value of all organized exchanges • Must own a seat on exchange in order to trade • Trading resembles an auction
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Corporate Monitoring of Their Own Stock in the Stock Market
Stock repurchases Signals that management believes the stock is undervalued Leveraged buyouts If managers believe the stock price undervalued, they may buy the outstanding shares with borrowed funds = LBO Stock offerings Signals overvalued shares
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Stock Exchanges
Over-the-counter market • No trading floor • Telecommunications network Nasdaq • National Association of Securities Dealers Automatic Quotations • Thousands of small firms, plus high-tech giants Pink sheets • Tiny firms that do not meet requirements for 9 NASDAQ
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Stock Indexes
Investing in stock indexes • Indexing • Has become very popular – Lower transactions costs – Studies find that actively-managed funds do not outperform stock indexes Examples of publicly traded stock indexes • SPDRs • Diamonds
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Investor Monitoring of Firms in the Stock Market
Communication with the firm • Effort to place pressure on management • Institutional investors – CALPERS Proxy contest Shareholder lawsuits
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Investor Monitoring of Firms in the Stock Market
Shareholder activism • An investor who is dissatisfied with the way managers are running a firm has 3 choices: – Do nothing – Sell the stock – Engage in shareholder activism
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Regulation of Trading on Stock Exchanges
Circuit Breakers Stock Quotations 52-week price range Symbol Dividend Price-earnings ratio Volume Previous day’s price quotations
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Background on Preferred Stock
Represents equity interest, but usually no voting rights Stated fixed annual dividend Dividend may be omitted Cumulative provision
Stock Exchanges
Consolidation of stock exchanges Market microstructure Specialists, floor brokers, and market-makers • Role of specialists Types of orders • Market order • Limit order • Stop order
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Background on Common Stock
Common stock = certificate representing partial ownership in a corporation Issued by corporations that need long-term funds • Issued in the primary market • Stock is then traded in the secondary market, creating liquidity for investors
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Background on Common Stock
Ownership and voting rights Owners of common stock vote on: • Election of board of directors • Authorization to issue new shares • Amendments to corporate charter • Other major events Many investor assign their vote to management via a proxy Households own about half of all common stock, the rest is owned by institutional investors
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Stock Market Performance
Comparing stock performance to bond performance
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Institutional Participation in Stock Markets
Program trading by institutions • Simultaneously buying and selling of a portfolio of at least 15 different stocks valued at more than $1 million • Most commonly used by securities firms • Program refers to the use of computers Impact on stock volatility • Often blamed for rise or fall in stock market • Studies show that program trading does not increase volatility