Markets Flashcards
What is a stock exchange?
A place where financial instruments can be bought and sold.
How does a stock exchange work?
In its simplest forms it matches buyers and sellers so they can agree on the price.
What is the function of a stock exchange?
To facilitate trading in financial instruments.
Where are stock exchanges found?
Most major cities including London, New York, Frankfurt and Tokyo.
What companies do stock exchanges trade?
Only Companies listed on the stock exchange.
What is the process of a company becoming listed?
Companies admitted to a stock exchange have to arrange an Initial Public Offering or an IPO.
Why do companies become listed?
1) To raise money by selling shares,
2) To increase awareness.
3) The shares are easier to sell in future - known as liquid or liquidity.
What is a stock exchange indices?
This is the amalgamation of all the individual stocks on the indices. Most famous is the Dow Jones Index or the FTSE100 index.
How are indices used?
1) They can be used as an average measure of how well shares have performed over a period compared to my own investment. They are therefore used to benchmark.
2) It is also possible to invest in an index rather than individual companies.
How are the indices weighted?
They are weighted by the size of the underlying companies.
Which market is the Dow Jones Industrial Average?
US
Which market is the S&P 500?
US
Which market is the FTSE100?
UK
Which market is the Dax?
Germany
Which market is the Hang Seng?
HK
