Week 4_09 - Stock Market History

Week 4_09 - Stock Market History - A Brief History of US...

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Unformatted text preview: A Brief History of US Capital Markets Practical Topics in Investment Management Practical Topics in Investment Manageme 2 Agenda Discuss Why History is Important Early Financial Market History Advent of Modern Era Major Capital Market Events Since 1926 Practical Topics in Investment Manageme 3 Why Does History Matter? Practical Topics in Investment Manageme 4 Early Financial Market History Practical Topics in Investment Manageme 5 Development of Money Definition: Any good or token that functions as a medium of exchange that is socially and legally accepted in payment for goods and services and in settlement of debts. Important to review money because it is a mechanism that fosters the efficient development of trade Money must be scarce Is money real? Practical Topics in Investment Manageme 6 Development of money cont. Goods were initially used as currency: Bartering Requires coincidence of wants Pricing could be erratic and unpredictable Bartering inefficiencies led to the creation of goods that represent a unit of exchange. Practical Topics in Investment Manageme 7 Other forms of money The use of shells as forms of jewelry/commodity dates back 100,000 BC Other Forms of money Livestock Cigarettes Alcohol Silk Spice Whales teeth Practical Topics in Investment Manageme 8 Money Continued By 550 B.C. the Greeks were coining Gold and Silver Coins represented stored value and an agreeable means of exchange among people and regions Coins were easily transported The nature of the scarcity of gold and silver made it easy to keep it valuable and desired Practical Topics in Investment Manageme 9 Development of Capital Markets What are capital markets? Any market where a government or company can raise money (capital) to fund any long term investment Selling bonds and stock are two ways to generate capital Governments need capital for building infrastructure, financing budget deficits, etc. Primarily raised via debt (bonds) Companies need capital for capital expenditures, startup costs, covering operational shortfalls, etc. Usually raised initially through equity and later a combination of equity and debt Practical Topics in Investment Manageme 10 Paaarrrrttyy!!!! First markets were held in celebratory fairs Only held on occasion because there was not enough commerce Typically only the wealthy were trading Usually arranged by government to encourage trade Tax discounts were given to motivate trade Practical Topics in Investment Manageme 11 Fairs to Exchanges Saturation of wealth Price Revolution of the 15 th-16 th century Portuguese enter fairs with gold from the New World Traders could no longer wait for fairs and need a permanent location to trade Belgium town of Antwerp where fairs were popular gradually became the agreed upon permanent location What needs to happen for occasional fairs to become exchanges? Practical Topics in Investment Manageme...
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This note was uploaded on 04/05/2009 for the course UGBA 137 taught by Professor Staff during the Spring '08 term at University of California, Berkeley.

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Week 4_09 - Stock Market History - A Brief History of US...

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