In answering the question on discussion whether it is important for stock markets to be efficient in order to fulfil its roles, it is important to discuss the roles and the functions of the stock market and why it is important for the stock market to be efficient in order to be able to operate and to perform its role as an efficient allocator of resources.. Secondly it is essential to look at the concept of capital market efficiency and what it means. Clearly, market efficiency is a concept that is controversial and attracts strong views, partly because of the differences in the way individuals explains the concept, and partly because it is believed that it determines how an investor will approach an investment. Finally discuss the types of efficiency and whether it’s only important for the stock market to be allocative efficiency in order to operate or they are other types of efficiency which also help the stock market to fulfil its roles.
Stock markets are markets where government and industries can raise long term capital and where investors can buy and sell securities. Stock markets are established for the purpose of assisting, regulating and controlling business of buying, selling and dealing in securities. They provide a market for the trading of securities to individuals and organizations seeking to invest their saving or excess funds through the purchase of securities. Stock markets play a role in the supervision of trading to ensure fairness and efficiency. Stock markets perform an important role in making sure that there is fair pricing in the market. The mechanism of the stock market enables buyers and sellers of securities, to receive the best price possible for a particular stock. There are several roles and func...
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The stock market is a vehicle to invest money. It is where consumers buy and sell fractions of companies, and is referred to as stocks. A proven method to achieve wealth while keeping up with inflation, comprised of publically held companies who offer goods and services that are used by the general public daily. Companies sell stocks to public investors in a free and open market environment on a daily basis, which is an effective strategy to build a sound financial future.
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middle of paper ... ... Right now, it is almost impossible for people to see how strong the international commodity markets are. Our parents, cousins, and friends, everyone's ears are pinned to what goes on in the market every day of their lives. We need to start teaching more about stock market trading, and with this new expansion of knowledge, we will allow the market to grow stronger and stronger, but at a steady pace.
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In turn everything in the present and the future is judged through the stocks as they hold a high importance in industrialized economies showing the healthiness of said countries economy. As investing discourages consumer spending over all decreases, it lead...
Market efficiency signifies how “quickly and accurately” does relevant information have its effect on the asset prices. Depending upon the degree of efficiency of a market or a sector thereof, the return earned by an investor will vary from the normal return.
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This paper will encompass the importance of the U.S stock market/stock exchange versus the Chinese stock market/ stock exchange, with a brief introduction about how each stock market/stock exchange came into existence, the importance of each stock market/stock exchange, how the U.S and Chinese manage their stock markets/stock exchange, how corporations are appointed plus the rules and regulations. This will also entail random facts about each stock market/stock exchange. Stock markets are like hitting a royal flush, if the price of your stocks goes up, you win; if it drops, you lose! The stock market, also known as the fairness market, is one in which shares are owned by companies and their shareholders. The companies that are on the stock The Chinese, Shanghai’s stock market came into existence in June 1866, followed by Hong Kong’s stock market coming into existence in 1891.
I became an enthusiast of finance ever since I was at high school. At the political economy class, my teacher asked us: if you have a million RMB, how would you use it? She then introduced us the concept of investment, and I was intrigued specifically by the stock. For the latter two years of my high school, I have been reading books and articles regarding the stock market in the U.S. and in China. As one of the outstanding students ranked top 1% in College Entrance Exam in Hainan Province, China, I was accepted by the City University of Hong Kong with a full scholarship. With the strong interest in finance, I chose quantitative finance and risk management as my major.
Following the trend of economy, it is important to investors to understand that strong economy creates strong stock market. To elaborate further, as stock prices are increased by current and future expectations of earnings, thus without a strong economy it would be difficult for the companies to increase and sustain their earnings (Kong 2013). The economy development is usually calculated using the gross domestic product of a countries. On the other hand, a change is the stock price can also cause a major impact to the consumers and investors directly. Hence, a loss in confidence by investors can cause a downturn in consumer spending in the long term, which will also affect the economy’s output (Aysen 2011). The graph below shows the relationship of stock market price (KLCI) and the GDP of Malaysia in 2009. Thus, it can be concluded that the economy and the stock market has a positive relationship.
Block, S. B., & Hirt, G. A. (2005). Foundations of financial management. (11th ed.). New York: McGraw-Hill.
A stock market is a place where stocks and bonds are regularly traded. The stock market plays an important role in the economy where the prices of the stock reflect upon the growth of the country’s economy. Companies who choose to list themselves in the stock market are known as public listed companies where their company assets are open for investment to the public. The stock market connects the buyer and seller where companies are in need of funds and investors are looking for a place to invest their money in. Investors who have invested money into the stocks of the public listed company are now shareholders of that company, where investors now own a part of the company. The purpose of investors investing their money into the stock market is for the financial return, also known as profits. If the company or firm makes a profit, shareholders will be rewarded with dividends however, if the company is making losses, shareholders will also be making a loss in their investment. The stock market prices are volatile where prices rise and fall on a daily basis therefore, investors who invests in the stock market should be aware of the risks involved.
This paper will define and discuss five financial theories and how they impact business decisions made by financial managers. The theories will be the Modern Portfolio Theory, Tobin Separation Theorem, Equilibrium Theory, Arbitrage Pricing Theory (APT), and the Efficient Markets Hypothesis.