Chapter 7 Flashcards
What is a stock exchange
A place where financial instruments can be purchased and sold. It’s where sellers are matched with buyers and transactions are agreed.
Are stock exchanges physical or electrical?
Originally - physical marketplace where buyers and trades.
current - electronic markets. only member of the exchange can access the electronic market.
What is the function of a stock exchange?
trade in financial instruments, e.g. share, enabling sellers to sell their investments and enable buyers to purchase investments
What companies does a stock exchange trade shares
have to be accepted for trading and become a listed company. To become listed a firm has to be established to attract trading in their shares
What’s an IPO
process of a company becoming listed and having its shares admitted to trading on a stock exchange for the first time
Reasons for undertaking an IPO
- raising money by selling shares
- increasing the public profile and awareness of the company
- stocks becoming liquid
What does the exchange report?
prices the shares are trading. participant can judge at which prices they may be able to buy or sell
What is the closing prices?
Formal report of prices at which the shares are trading at the end of the day. So it’s easy to figure out how good/bad a shares price has performed that day
What does the stock exchange index do?
Investors can find out how shares are doing. If the index has increased, then prices in general increased. If the index has decreased, then prices in general decreased.
What is the most well known stock exchange?
Dow Jones Industrial Average (DIJA)
What is a single market indices
Indices that are drawn from the shares listed on just one exchange
What is a global market indices
Shares listed on various exchanges internationally
What is a stock market index
measures the change in the share prices of different companies in a segment, so the price movements of larger firms have a bigger effect on the overall index.
How is the index value termed in points?
‘DIJA increased by 50 points today’ - index went from 31,150 points to 31,200
What does DIJA consist of
30 large listed US companies that are listed on either the New York stock exchange or NASDAQ
