Finance (Ch7).pdf - ?r^lrri t EME iloNEy,BAriKrNu AND...

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?r^lrri. t!EME i\loNEy,BAriKrNu AND FTNANCTAL MAru<ETS r21200 7 p,t--(Exceilent center) 0r-3s08r94@[email protected] , The Stock Market r sraro{u i(Class 3)Yield for Investors 1 ruaorolulrudruilrinar4u xio{o^or{u I,"^r'1ry{r'l -r-'!r- E Stock Price Appreciation r n rr-ui:-rffutor: rn,r?u )E Dividend Reinvestment ( fluna )Long-Term Stock Market Behavior (uqon::rro.:oraroriulu:ruvur2y ';.,/7,.a,-u *tt ,t*t .' 1t'fo;'.,rit-or2"rt.,,.k1la ,r,1 .f,Z'ri i O,rr,rflr,'\- ',,::,!r.':l r,"r,D Mosr economists ravor rhe srand;i ;no-p;;:;ffi];i*'I.'rirroo" .r,n. .lri','*representative in'r t..l' {tv ri,tzT tc lr''l r\ rt ' ?&.7,6)indexof broad trends in the stock mark- -----Il dnra:ugaran{letrirulvqjfiotto.r:tnrduorno-rfi.,S&p5QQ', d(,ilu6..fi*,ar,,,,rrl{il1roUiTI11-$]" T,,( '",. ]"" j, )t^id[J To graph long-term stock market behavior, we use a logarithmic scale so that yolffi=iriffit "n.-ong.,i.| -, 1o Jrtt \ - 11?lvl 4 t'd./ugsd: tuki6 pc64t 9:th?t w.b n .itrFr'iidltg.yn _r.Jd -rh,rhr/c.6nrey:rnrrlrfi 2 uluE "Bull markel"-- period of above-normal grorvth of stock prices( nllennrouu!fl :sfi I rfl urirldr-tnliuqsfiurfr unnv:lnfi ;o "Bear market" is one with a significant decline ( nr.:vqarq*,,ufifi riludr.rff:rnrdunn )tn the slope of trends as indicating gr owth rate (o% changes in the stock prices)r n: r-r"{: rn r{u lu: e usu rx rr rra : n r:r dru,r e :'lu,i'nuruln r:,fr r.,drl. \r-ni'3.:rill il- i il 1-Ez4ve rend?d upwnrd !v.r rhe p.s..enrury..lrnng in rhe pas! 50 years.Downloaded fromABACTODAY.COM
I Over the long term, stock returns .i!p_T: returns from other assets( 1u:say,fl rr 1 nanorinru:rer#uosa.:n.jrruanolrryunwluodxo'u 1;-&ilf,ti',i'r' ; firr i rtr,. i-rilinl,:f,,1\ llu ^L l6,/:,istock Prices as a Barometer of Economic Sentiment i:rnr{u riJurn?orinuur'irir6'ruLs:sofio )E A Strong rrerformance of stock market reflects 1 lurixfrnr:rna rn{ufiolrilurnioravfioufir ;E optimism about the future econom) r nr *ra:u3 fr0fr6'lu ouron 1I High public's confidence in the Fed. Ability { r.l: ltrrufin:u:iulo lu ,t ) rrr d-11|, fl r er:ritrfl t: d r.,l rE Low inflatior.r ( dn)-rri'ur1lori.r I. low unemployment ( dn:rnr:irwtidr )1 rfr onrrrrn:vgfi rullrff rrirl:ualdosa! )X Bubbles occur when stock prices are far above those warranted by economic conditions andprospects i :rntrlu4.rrfiun.jrantrsrfl:trfi o nyuur'[dlff riJuoil I1 nrrurfiorlur:vrirs:rnr{urrarnr:rra:u3fi o ;'Ihe link between stock prices and economic performance reflects qausation runninq in both direcfions(Two-Way) r izu asioiuunyfru rA good economy t rn:ugfion';0 rising stock prices: people are willing to pay higher prices for shares ofstock as companies' sales & profits increase

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