Business Finance - Research and Trades

Topics: Stock market, Stock, Investment Pages: 7 (2241 words) Published: January 15, 2014
Research and Trades
EMH
From the Efficient Market Hypothesis which assumes that all information and prices are known by all parties and no person has advantage hence nobody can beat the market with information that is not already known apart from by luck. This can be argued from our points of view that we do not as much information as some. Often prices are delayed so we maybe getting prices that are not what we would like, also a price that we would like to buy at could be taken by those closer to the market i.e. the brokers etc.@@ Portfolio Theory

This states that realistically people are normally risk averse. They would rather invest in low risk low returns rather than more risky investments for high returns. Risk
As with all investments there can be risk. With cash investments there is normally less risk than that of share investments. These investments normally carry a high financial risk and high rewards also. Often companies can be more liquid or more geared making the risk higher in terms of capital risk as well as currency risk if from another country but they offer the highest rewards or possible losses also. SD Bid-Ask spread

The Bid-Ask spread is seen as the difference the bid price – what the buyer is willing to pay and the asp price – what the seller is willing to sell it for. The ask price is normally slightly higher than the bid price. The spread is seen as the profit for the broker or specialist. The difference is dependent on many factors but mainly that of the securities liquidity. If a security has high volumes or amounts traded then the bid ask spread will be narrower. Shares listed on the stock exchange

A stock exchange is part of an overall stock market. A stock exchange provides a platform for traders and brokers to trade stocks as well as other securities. Stock exchanges can be seen as a mutual organisations or corporations. The securities tradable can consist of: company issued shares, unit trusts, bonds and other products. Modern stock exchanges are electronic so trades can be carried out quickly and efficiently. Stock exchanges allow companies to raise the capital required for growth by issuing shares to investors. There are certain requirements needed by a company before it is able to be listed on a stock exchange and there are different markets available depending on the size of business e.g. giant or small growing. The requirements for the London Stock Exchange’s main market are: 1. £700,000 minimum market capitalization

2. Audited financial statements for the last three years
3. Minimum of 25% public float
4. Working capital, from the date of listing, which is adequate for at least 12 months

Shares can be units found in various financial tools such as stocks and investments. The income generated from shares is known as dividends which can be paid out yearly for both ordinary and preference shareholders however it is not a legal requirement. Dividends are tax free to the shareholder buy companies must pay tax to distribute them. Shares are valued by the price of likely purchase should they be sold. Actual sales are seen to be the best market indicators of the actual price at that time as supply is compared to demand to derive the price.

Investment Trust

This involves investing in shares in a company that uses this capital to invest its own assets mainly in the form of ordinary shares using employed professionals. Shares invested can be worth more than the portfolio of the trust so can be described as being at a premium and the reverse is known as at a discount.

Unit Trust

Unit Trusts can be seen as collective investments defined by a trust deed. Unit Trusts are open-ended so the value of the assets is usually the number of issued units multiplied by the price per unit minus any transaction, management or other costs. There is usually no matching of supply to demand as units are created as money is invested according to current buying prices...
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