Running head: STOCK MARKETS 1

Stock markets

Student’s Name

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Professor’s Name

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A. Reflection on how the lecture complemented or contradicted the topic readings.

The lecture complement the topic readings in that it also clarifies that once a company

completes an initial public offering (IPO), the company shares become public meaning that they

can be traded on a stock market. The lecture also defines stock markets as avenues where buyers

and sellers of shares assemble and decide on the best price to trade. There are some exchanges

that have physical locations to carry out transactions whereas other stock exchanges are virtual,

poised of networks of computers where the trades are usually made and recorded electronically.

Stock markets are optional markets, where existing proprietors of shares can execute with

potential purchasers. Understand that the organizations recorded on stock markets don't purchase

and sell their very own shares all the time (organizations may take part in stock buybacks or

issue new shares, yet these are not everyday tasks and frequently happen outside of the structure

of a trade) (Uotila et al, 2009). So when you purchase an offer of stock on the stock market, you

are not getting it from the organization, you are getting it from some other existing investor. In

like manner, when you sell your shares, you don't offer them back to the organization – rather

you pitch them to some other financial specialist.

The principal stock markets showed up in Europe in the sixteenth and seventeenth

hundreds of years, primarily in port urban areas or exchanging centers, for example, Antwerp,

Amsterdam, and London. These early stock trades, be that as it may, were increasingly much the

same as bond trades as the modest number of organizations did not issue value. Truth be told,

most early companies were viewed as semi-open associations since they must be contracted by

their legislature so as to lead business.

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The coming of present day stock markets introduced a time of guideline and

professionalization that currently guarantees purchasers and venders of shares can believe that

their exchanges will experience at reasonable costs and inside a sensible timeframe. Today, there

are many stock trades in the U.S. what's more, all through the world, a significant number of

which are connected together electronically. This thusly implies markets are progressively

proficient and increasingly fluid.

The costs of shares on a stock market can be set in various ways, yet most the most

widely recognized path is through a bartering procedure where purchasers and merchants place

offers and offers to purchase or sell. An offer is the cost at which someone wishes to purchase,

and an offer is the cost at which someone wishes to sell. At the point when the offer and ask

harmonize, an exchange is made (Kupiec, 2014).

Some stock markets depend on expert merchants to keep up persistent offers and offers

since a spurred purchaser or dealer may not locate each other at some random minute. These are

known as pros or market producers. A two-sided market comprises of the offer and the offer, and

the spread is the distinction in cost between the offer and the offer. The more restricted the value

spread and the bigger size of the offers and offers, the more noteworthy the liquidity of the stock.

Also, if there are numerous purchasers and merchants at consecutively higher and lower costs,

the market is said to have great profundity. Stock markets of high caliber for the most part will in

general have little offered ask spreads, high liquidity, and great profundity. Moreover, singular

stocks of top notch, substantial organizations will in general have similar qualities.
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B. You will begin with a portfolio worth $250,000, please make an investment (s) totaling at

least $25,000 in securities directly related to the lecture topic. ETFs and mutual funds

are acceptable investments. You must provide a full description of each investment

position and investment rationale.

1. What is the dollar and percentage of your portfolio? (portfolio trades must be completed

by 4PM each Friday)

(25000/250000)*100 = 10%

2. How does your portfolio performance compare to the S&P performance since you made

your first trade and the past week?

Trading in my own portfolios lag the S&P. There are many reasons for why this

particular fund would over perform in a given period, but a few key reasons explain why

most funds cannot outperform their indexes. Discuss the reasons for the differences you

identified in #2.

One reason is the investors frictional costs - trading costs, loads, commissions and capital

gains taxes that must be paid when they move in, out or around a fund or portfolio.
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References

Uotila, J., Maula, M., Keil, T., & Zahra, S. A. (2009). Exploration, exploitation, and financial

performance: analysis of S&P 500 corporations. Strategic Management Journal, 30(2), 221-231.

Kupiec, P. H. (2014). The performance of S&P 500 futures product margins under the SPAN

margining system. The Journal of Futures Markets (1986-1998), 14(7), 789.