INTRODUCTION
1.1 Background of the Study
A number of macroeconomics factors of any country influence the performance of the stock market which is working within the country. Investors consider macroeconomics factors very important when they invest in stock market. Inflation rate, interest rate and exchange rate are the most important variables between these macroeconomic factors which affects the performance of the stock market.
A stock exchange is an organized and regulated financial market where the securities of joint stock companies are traded freely and the prices are governed by the forces of supply and demand. In simple words, stock exchange is a place where buyers and sellers come together to exchange their holdings like shares, bonds,
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Karachi Stock Exchange (Guarantee) Limited (KSE), currently the biggest and most liquid stock exchange in Pakistan, was established on September 18, 1947. There are 574 companies and 35 sectors listed on Karachi Stock Exchange listed in KSE and the total market capitalization is Rs. 6,969.212 billions.
Karachi stock market is remained highly volatile during the last decade. There are three intensive financial crises were observed during the last few years. The first time market were crashed in March 2005 and the second collapse were observed in the second quarter 2006 and the third and most dangerous crash were observed from may 2008 to January 2009 in this period KSE 100 index were dropped about to 10 thousands point. The board of directors of KSE placed a floor in August 2008 due to sharp fall in share prices of KSE 100 index later removed in December 2008.
Interest rate is inversely related to stock prices and exchange rate. Interest rate is the rate at which interest is paid by the borrowers for the use of money which they borrow from lenders and also used as a discount rate to discount future cash flows of the financial assets, Interest rates often change as a result of inflation and Federal Reserve Board
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Any activities from monetary authorities have a significant affect on stock prices and fluctuation of interest rates flags great or terrible data to financial specialists. (Lobo, 2000).
Exchange rate and stock market also has a relationship. Foreign financial specialists exchange their profits from stocks in to their own currency. Foreign financial specialists get affected when the local currency gets stronger and changed over into weaker currency.
Exchange rate has negative relationship with stock prices. When exchange rate increases Stock prices decreases and when exchange rate decreases stock prices increases. In this case, stock price is expected to lead exchange rate with a negative correlation [also explained by Krueger (1983)].
Inflation rate as measured by Consumer Price Index (CPI) represent the trend of prices of goods and services in the economy. The other key factors influencing is the growth in money supply, the supply side bottlenecks, adjustment in government administered prices, the imported inflation (exchange rate adjustment) and escalations in globalfuel and food prices. The CPIwhich is the headline inflation captures the price movement extensively and is therefore taken as an indicator of
The events that unfolded on September 11th and the days that followed also profoundly effected the stock market. It is the purpose of this paper is to examine what happened to both the Dow Jones Industrial Average and the NASDAQ after September 11th and how it is similar to events such as the bombing of Pearl Harbor, the Oklahoma City bombing, and the Gulf War in terms of how the stock market experienced a blow and bounced back after a while.
A fundamental analysis uses economic and political factors, such as unemployment rates, interest rates, or inflation, as a means of predicting currency movements. Fundamental analysis is concerned with the reasons or causes for currency movements.
Stocks are highly liquid. Most stocks trading on a major exchange can be easily bought and sold.
The speed in which trading is being done is faster than a blink of an eye. Front runners are making trades before most traders are even aware that the market is open. It is all done in a split of a second and millions of dollars worth too. Traders have been waiting forever to be able to trade at large volumes in an instant. This is what they now have with services such as HFT and EFTs. The stock market is a place where people can make millions, if they have the money to begin with
The stock market is a centralized area where buyers and sellers comes together to perform stock transaction. When one thinks of the stock market, the first thing comes to mind is Wall Street which is sometimes referred to as the New York Stock Exchange as well as the NYSE.
There are only a handful of stock market exchange sites such as; the American Stock Exchange (AMEX), the New York Stock Exchange (NYSE), and the National Association of Securities Dealers Automated Quotations (NASDAQ). Each site has several similarities as well as differences. An essential difference between the exchange sites is their trading principles. The NYSE was founded in 1792, and has more of an auction market; whereas NASDAQ was founded in 1971, and is more of a dealer market. (Weinburg,
The stock market is a volatile, unforgiving battleground where fortunes can be made and lost within minutes. The first major stock exchange in the United States, The New York Stock Exchange (NYSE), dates back to 1792 when it acquired its first securities. Since then, the stock sarket has reached an astronomical size, with a market volume of over twenty trillion dollars. This success is not without its setbacks, though. The stock market crashes of 1929 and 2008 have single-handedly led to the worst economic recessions America has ever seen. Considering the sharp ramifications of a market crash, it is important to understand why
The stock market is simply a place where stocks or shares in a company are bought and sold. An example of a stock market is the New York Stock Exchange.
By 1928 stocks became the most common conversation topic everywhere. It did not take long for stock market trading to go wild. More than two million people began investing in the stock market. Yet only a few studied the finances and businesses of the companies that they invested in. Houses were mortgaged and life savings were invested in the stock market without knowing that the stock prices may drop (Mack). In the new investors’ experience, stock market had always gone up. However, weaknesses, such as overproduction of farms, overconfidence, bank failures, fraudulent companies, and low wages, soon proved the investors wrong. After stock price peaked on September 3, 1929, it began to sink and gradually picked up its falling speed. As the price dropped, more brokerages hiked margins, and “it was like yelling fire in a packed theater (Colombo).” Described as the nail in the coffin, Black Tuesday, October 29, 1929, was the most devastating day. The index fell 43 points and 4 to 5 times of the normal shares traded hands. Throughout the remaining of the year, investors lost $100 billion in assets (Williamson). The gradually built Great Crash had severe consequences on global economy and society. The following paper is going to discuss the causes of the stock market crash of 1929. People’s overconfidence led to the United States’ stock market crash in 1929 by ignoring the warning
What is a stock market? What is an example of a stock market? A stock market is a place where stocks or shares in a company are bought and sold. An example of a stock market is the New York Stock Exchange.
The historical development of the English legal system has created a parallel system where equity operates alongside the common law, emphasizing a system that coherently has distinct legal differences in its application.
The project is done to find out the impact of stock split on the stock market. In our project, we have made use of event study methodology to assess the accuracy of stock price reaction of 39 public listed Indian companies in National Stock Exchange (BSE) in the year 2006 and onwards. The abnormal returns (actual returns-returns from regression line) results were taken for 20 days before and after the announcement date to test whether the result is significant or not (Level of significance=5%). The project shows that there is no significance difference in the price level before the announcement date while after the announcement date, there was a significant difference in the price level for few days(level of significance being 5%) The project supports the hypothesis that Indian stock market is semi strong efficient.
In 2003, Capital Market Authority (CMA) was established under the Capital Market Law (CML) to act as regulatory supervisor for the capital market. Capital Market Authority regulate and supervise different critical issues such as market conduct, merger and acquisitions, corporate governance, and issuance of financial tools such as mutual funds, IPOs and Sukuks “Islamic bonds”. Thus, the establishment of CMA defined a new stage of financial liberalization in the country. CMA established the legal and regulatory platform to open up the Saudi capital market, support the privatization effort and increase public participation in the market while promoting efficiency and transparency. Furthermore, in March 2007, Tadawul exchange was re-incorporated as joint stock Company with a capital of USD 320 million to increase autonomy for the exchange. After the formation of CMA, the Saudi capital market continuously evolving in term of breadth, depth and complexity. In March 2010, the number of listed companies increased to 139 from 76 back in 2001 as local companies started to look at capital markets to fund their future financing needs. Due to the increasing in investors participation, Tadawul’s total market capitalization at a compound annual growth rate “CAGR” of 34.8% to SAR 1.9 trillion which about USD 507 billion between 2003-2007. Due to the financial crisis in 2008-2009 the market capitalization for Tadawul declined to SAR 1.2 trillion, which about USD 320 billion. Between the years of 2003-2007, the stock market activity grew in a fast pace without interruption in term of value, volume, and market cap along with rising in the number of transactions. The total trading volume of shares on Tadawul Stock Exchange increased at a CAGR of 11.4% between 2003-2009. The
The stock market is an essential part of a free-market economy, such as America’s. This is because it provides companies the capital they need in exchange for giving away small parts of ownership in their company to investors. The stock market works by letting different companies sell stocks to gain capital, meaning they sell shares of their company through an exchange system in order to make more money. Stocks represent a small amount of ownership in a company. The more stocks a person owns, the more ownership they have of that company. Stocks also represent shares in a company, which are equal parts in which the company’s capital is divided, entitling a shareholder to a portion of the company’s profits. Lastly, all of the buying and selling of stocks happens at an exchange. An exchange is a system or market in which stocks can be bought and sold within or between countries. All of these aspects together create the stock market.
The XYZ Corporation was established in 2004 and their main office is located in Vancouver, BC. The company’s main objective is to create new innovating technology for media devices, computers, and digital music players. They deal with the design, manufacturing and marketing of the products. XYZ Corporation has been providing Canadians with groundbreaking technology throughout the years and continues to create new technology to provide others with top-level technology. Although, recently their success rate has appeared to drop rapidly due to a number of factors that will be explored throughout this case study. Their main objective is to target the problems so that they can work towards having the issues resolved as quickly as possible. If they do not take any course of action, the state of the company may be in extreme danger. This case study is designed to explore the areas of the company and discover the problems blocking the XYZ Corporation from success.