FIN4360_Chapter4_Slides

FIN4360_Chapter4_Slides - Rapid adjustment of prices to new...

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Investment Analysis and Portfolio Management C h a p t e r 4 Organization and Functioning of Securities Markets What Is A Market? Primary Capital Markets Secondary Financial Markets Classification of U.S. Secondary Equity Markets Detailed Analysis of Exchange Markets
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4-2 What Is A Market? Basic Concepts It brings buyers and sellers together to aid in the transfer of goods and services It does not need to have a physical location The market does not necessarily have to own the goods and services It can deal in any variety of goods and services Both buyers and sellers benefit from the market
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4-3 What Is A Market? Characteristics of a Good Market Availability of past transaction information must be timely and accurate Liquidity Marketability Price continuity Depth Low transaction costs: Internal efficiency
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Unformatted text preview: Rapid adjustment of prices to new information: External efficiency 4-4 What Is A Market? Decimal Pricing Prior to the initiation of changes in late 2000 that were completed in early 2001, common stocks in the United States were always quoted in fractions Now U.S. equities are priced in decimals (cents), so the minimum spread can be in cents, resulting in lower transaction costs The number of transaction has increased significantly while the average transaction size has reduced 4-5 What Is A Market? Primary markets Market where new securities are sold and funds go to issuing unit Secondary markets Market where outstanding securities are bought and sold by investors. The issuing unit does not receive any funds in a secondary market transaction...
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This note was uploaded on 01/24/2012 for the course FIN 4360 taught by Professor Davidbray during the Spring '12 term at Kennesaw.

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FIN4360_Chapter4_Slides - Rapid adjustment of prices to new...

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