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Research The Stock Market

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Economics

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Stock Market

Stock is a small piece of ownership in a company, it is a form of security that represents claims

on a company’s earnings and assets. It is described as the ownership certificate of a company. A

Share is a portion of ownership interest in a company and represents an equal proportion of the

company’s capital. An exchange is a controlled institution or organization that hosts a market

where stocks, securities and commodities are traded. Its main function is to facilitate fair and

organized trading, also to facilitate efficient sharing of price information for the securities on the

platform. There are various exchanges in the world but we shall only focus on two, the New

York Stock Exchange (NYSE) and the National Association of Securities Dealers Automated

Quotations (NASDAQ). The above exchanges have both similarities and differences which are

mentioned in the following paragraph.

They are both located in New York City and are two of the largest stock exchanges in the world.

Both are involved in equity exchanges and they match buyers with sellers. They both make profit

from the listing fees. They both have a wide range of indices. They both have standard

requirements that must be met before a company is listed. They requirements are, companies

must have a minimum number of operational history, initial stock price and minimum earnings

threshold. NYSE is the oldest in the world as it was stared in 1792 while NASDAQ was started

in 1971. The trading platform on NYSE is physical and auction bases where a trader places his

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order on the floor or on the Universal Trading Platform unlike in the NASDAQ it’s

virtual/electronic and traders transact through a dealer and are executed electronically. NYSE has

less companies listed since it has a higher annual fee of $500000 while the NASDAQ has more

companies listed and has a less annual fee of $27000. The companies that trade on the NYSC are

the traditional companies with conservative business practices, for example, Coca Cola, General

Electric and IBM. NASDAQ mostly accommodates technology companies such as Facebook,

Microsoft and Oracle.

The DOW Jones track the 30 largest U.S companies and represents the large cap companies and

measures the daily movement of prices of the 30 companies. On the other hand, the S&P 500

tracks 500 large U.S companies in various sectors and measures the daily performance of 500

widely held common stocks. The indicators measure or show the direction of the overall market

trends. The mentioned indices have flaws. They both represent only a thin portion of the market

as they both list 30 and 500 companies. They are influenced by the high stock prices(DOW) and

large capitalizations(S&P) meaning the large companies have a significant influence on the

indices level compared to small capitalization(S&P) and low priced stocks(DOW).

Market sectors are used to describe the part of the economy in which business of similar

operations, product or services. The sectors include:

a. Energy sector which has companies that produce and supply energy. Examples are,

Exxon Mobile, Baker Hughes Inc. and Conoco Phillips.

b. Materials sector has companies involved in extraction and processing of raw

materials. Examples are, African Oxygen Ltd, Ezz Steel and Athi River Mining.

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Surname 1 Name Professor Course Date Stock Market Stock is a small piece of ownership in a company, it is a form of security that represents claims on a company’s earnings and assets. It is described as the ownership certificate of a company. A Share is a portion of ownership interest in a company and represents an equal proportion of the company’s capital. An exchange is a controlled institution or organization that hosts a market where stocks, securities and commodities are traded. Its main function is to facilitate fair and organized trading, also to facilitate efficient sharing of price information for the securities on the platform. There are various exchanges in the world but we shall only focus on two, the New York Stock Exchange (NYSE) and the National Association of Securities Dealers Automated Quotations (NASDAQ). The above exchanges have both similarities and differences which are mentioned in the following paragraph. They are both located in New York City and are two of the largest stock exchanges in the world. Both are involved in equity exchanges and they match buyers with sellers. They both make profit from the listing fees. They both have a wide range of indice ...
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