Finance- Noodle and Company

Question 1

Market Order

Answer 1

buy or sell right now at the current price

Guaranteed execution. not price

Question 2

Limit Order

Answer 2

Buy or sell if and only if the market reaches your price

Not Guaranteed execution, but if executed, guaranteed price

Question 3

Order info

Answer 3

stock, # of shares, Buy or Sell, Price, Time
You can either specify Price or Time. but not both

Price—> limit order
Time (now)—> market order

Question 4

Investors (types)

Answer 4

Retail- 40%, corp. stock, you and I, Generally or = 10000 shares

Question 5

Bid

Answer 5

Price at which a dealer/individual will BUY the stock (from you)

Question 6

Ask

Answer 6

Price at which dealer/individual will SELL the stock (to you)

Question 7

Bid-Ask Spread

Answer 7

Difference between the highest bid and lowest ask in any market, dealers buy at their bid and sell their ask earning the spread

Question 8

Types of Markets

Answer 8

NASDAQ and NYSE Euronext- where you list and who governs you

Regional exchanges (Pacific, Midwest), electronic communication networks (ECNs), Dark pools- just trade your stocks

Question 9

Dealer Market

Answer 9

Buy Marketdealerdealerdealer

Question 10

Auction Market

Answer 10

Buy MarketSell Limit
(public Order) PO trade directly (public order)
with each other

Question 11

NASDAQ

Answer 11

“National Association of Security Dealers Automated Quotation” system, worlds first ECNs—> floorless, 1971

Dealer Market
Most public orders are filled by dealer-like car dealer
No physical location, linked electronically

Question 12

New York Stock Exchange

Answer 12

NYSE- 1792, Auction Market, most public orders interact with other public orders-like art or estate auction

Physical Location in New York

Question 13

Electronic Communication Networks- ECNs

Answer 13

fully automated open electronic limit order books, Individual investors can view the limit order book and enter buy and sell orders

ECN automatically matches orders for execution

Question 14

Dark Pools

Answer 14

crossing networks that provide liquidity that is not displayed on order books, account for 10% of equity trades, totally anonymous

Question 15

Institutions

Answer 15

Shareholder- mutual funds, Exchange traded funds and index funds, pension funds, hedge funds

Question 16

Exchange Traded Funds ETFs
and
Index Funds

Answer 16

hold 12% of total assets managed by registered investment companies.
turnover their holdings infrequently, as they are constructed to track designated indices

Question 17

Mutual Funds

Answer 17

Median MF turnover is 63% per year. but varies widely by specific fund

Question 18

Hedge Funds

Answer 18

median HF turnover 102% per year-meaning the HF turns over its entire portfolio every year. Mean > 102%

Question 19

Institutional Effect

Answer 19

increase institutional turnover implies more trades of large blocks increase stock price volatility. Increase in ETF and IF holdings decrease turnover. Increase in MF holdings Increase turnover. Increase HF holdings Increase 2x turnover.