7) Markets

Question 1

what is the purpose of a stock exchange?

Answer 1

• a place where financial instruments can be purchased or sold => sellers are matched with buyers and transactions agreed
• can be physical market places but nowadays are electronic where only members of the exchange are allowed to access the market

Question 2

what is the function of a stock exchange?

Answer 2

• to facilitate trading in financial instruments, like shares, enabling sellers to sell their investments and enabling interested buyers to purchase investments

Question 3

what are the requirements for a company to be listed?

Answer 3

• having their shares admitted to trading on a stock exchange for the first time IPO - first time shares offered to the public

Question 4

what does the exchange report?

Answer 4

• the price at which the shares are trading
• ## the price at the end of day - closing price - to see how share performs day to day

Question 5

what is a stock exchange index?

Answer 5

• shows the general increase and decrease of share prices for investors => DOW JONES INDUSTRIAL AVG - nyse
• can either be single or global market indices depending on how many stock exchanges they portray

Question 6

how does a stock market index work?

Answer 6

• a number that amalgamates a group of share prices weighted by the size of the firm, so the price movements of larger firms have a bigger effect on the overall index
• as the shares in the group change value, the index also changes, but they all essentially go up by the same on avg

Question 7

examples of stock market indexes?

Answer 7

• Dow Jones
• NASDAQ
• FTSE 100
• Nikkei 225
• S&P 500
• DAX
• Hang Seng