What is the Stock Exchange?The stock exchanges can be defined as organized and specialized markets in which there are transactions with securities securities through intermediaries authorized, known as Casas de Bolsa or stock exchange jobs. Bags provide the public and its members the facilities, mechanisms and technical instruments that facilitate the negotiation of securities values subject to public offering, at prices determined by auction. Depending on the moment in which a title entering the market, these negotiations permits would trade in the primary market or in the secondary market.
FUNCTIONS:The main functions of the stock exchanges include the participants provide information truthful, objective, complete, and permanent values and the companies listed on the stock exchange, their emissions and the operations carried out therein, as well as supervise their activities, in terms of the strict adherence to the regulations.
IMPORTANCE OF STOCK EXCHANGES:The resources invested by the stock exchanges allow both companies and Governments, to finance productive projects and development that generate jobs and wealth for a country. Them contributors of these resources receive to change the opportunity of investing in a basket of instruments that les allows diversify their risk, optimizing their yields. It is important to note that the stock exchanges are complementary to the traditional financial system market.
HistoryThe origin of the stock exchange as an institution dates from the end of the 15TH century in the medieval fairs of Western Europe. In these fair began the practice of securities and securities transactions. The term "bag" appeared in Bruges, Belgium, specifically in the family of bankers Van der Bursen, in whose Palace is organized a market of titles values. In 1460 is created the bag of Antwerp, which was the first institution stock in sense modern. Subsequently, is created the bag of London in 1570, in 1595 the of Lyon, France and in 1792 the of New York, being this the first in the Mainland American. These were consolidated after the boom of the corporations.
MARKET PRIMARYThe market primary is characterized by the placement of new emissions of titles on the market. This usually not has cost some for the investor, since the commissions of intermediation are recognized directly by the societies stations of titles values.
MARKET SECONDARYThe secondary market includes the set of transactions through which is transferred ownership of securities securities previously placed through the primary market. Its objective is offer liquidity to them sellers of them titles, through the negotiation of them same before its date of expiration. Usually you can get better returns than in the primary market to the same terms and conditions. In this market commonly is the seller's title who assumes the commissions of intermediation.
What is the Market of values?It is a subsystem within the financial system and is composed of a set of instruments or financial assets, institutions or financial intermediaries whose mission is to contact buyers and sellers in the markets where different instruments or financial assets are traded.
What functions fulfills the bag?
- Puts in contact to the companies with those people that save.
- Provides liquidity to the create a market for buying and selling.
- It allows small savers access to the capital of companies.
- It serves as an index of the evolution of the economy.
- It determines the price of societies through the quote.
- Provides protection facing the inflation, to the get is normally some yields higher that other investments.
What is the stock market?In Ecuador, the Quito and guayaquil stock exchanges, the main shareholder is the State which issues State bonds which are very attractive for investors natural and / or legal, this great feature part of the works. Thus; the State by issuing bonds picks up money of the public and it dedicated to works of the State. It is also a body that helps businesses grow, contrasting the interest risk. A bag action also is securitisation which is nothing more than the sale of ideas through fitulos dollars.
What and how is what is trading in those bags?He object of recruitment is very broad and includes active financial, gold, metals or others goods. Most of the activity of the bags focuses on financial assets and these securities.
According to the income generating securities are divided into two broad categories:
Titles of rent fixed, these values represent a part aliquot of a loan to a company private, to an entity public or to the State.
Equity securities, comprising an aliquot part of the capital of a company (shares). Those shareholders have each rights economic special, different to the noteholders.
What assets are traded on stock exchange?.The most important are the following:
- Letters and notes.
- Rights of subscription.
- Shares of investment funds.
- Subscription bonds.
- Lyrics of the treasure.
- Public debt.
- Obligations of the State.
Who can invest in the stock exchange?From the point of view legal can buy and sell values in bag all them people that have capacity legal to make contracts of sale, are people physical or legal.
What is the Bolsa Mexicana de Valores?
The Bolsa Mexicana de Valores, S.A. de C.V. It is a private institution, which operates by granting of the Secretariat of finance and public credit, in accordance with the law of the stock market. Its shareholders are exclusively authorized exchange houses, which have an action each one.
FunctionsThe Mexican securities stock exchange (BMV), Forum in which carry out the operations of the stock market in Mexico, meets, among others, the following functions: providing infrastructure, monitoring and services necessary for the realization of the processes of issue, placement and exchange of securities and securities listed on the national register of securities and intermediaries (RNVI) , and other financial instruments; Make public the information market; Make the administrative management of the operations and transmit the corresponding information to SD Indeval; Monitor the activities of the companies stations and houses of bag, with regard to the strict attachment to them provisions applicable; and promote the expansion and competitiveness of the Mexican stock market.
Companies that require resources (money) to fund its operation or expansion projects, can get it through the stock market, through the issuance of securities (shares, obligations, commercial paper, etc.) that are made available to investors (attached) and traded (bought and sold) at the BMV, in a market of free competition and equal opportunities for all participants.
Primary marketTo make the offer public (placement) of them values, the company goes to a House of bag that them offers (market primary) to the great public investor in the field of the BMV. Thus, issuers receive the resources corresponding to the values that were acquired by investors.
Secondary marketA time placed them values between those investors in the market stock, these can be bought and sold (market secondary) in the BMV, through a House of bag.
The Stock Indices, what are they?They are an instrument of the stock markets to follow the evolution of the whole of the listed actions. Most of the indexes are a selection of actions that aim to represent the whole.
The indices stock are a reference each time more important for the managers of portfolio. It is also in the offer of new products, especially in deposits and funds. Is speaks more than them that of the markets to which represent.
Do you calculate all the same?No, some take into account market capitalization (value of contributions by the number of shares) to assign to each title a weight in the index. Therefore, the rise or fall of a significant value has greater impact on the index. Is the case of the IBEX 35 or the CAC 40's it bag from Paris. In other cases such as the Tokyo Stock Exchange NIKKEI index is the result of a sum arithmetic of the evolution of prices. In the latter case, the evolution of great value will mean for the index the same as if it were a smaller.
Why would they serve?Serve to measure the behavior of the market to which represent and compare it with the evolution of a value or a portfolio of values determined. Some have been also used for the creation of derivative products.
The most importantThe Standard & Poor's 500, He is calculated by measuring it arithmetic weighted by capitalization, composed of 500 representative companies.
The Dow Jones, consisting of 30 industrial values listed in New York Stock Exchange (NYSE) which is calculated by simple arithmetic of prices measured it.
Topix, composed of 1.250 companies and is made on a capitalization-weighted arithmetic mean.
Nikei Stoch Averange, includes 225 companies and is calculated by measuring simple arithmetic.
Financial Times-30 (FT-ordinari) which has 30 British companies, the geometric mean is used for its calculation.
FT-IT 100 (Footsie) comprises the 100 largest companies in the London market and its index is calculated through a capitalization-weighted arithmetic mean.
Deutscher Aktfenindex (DAX) includes 30 listed securities in Frankfurt and is calculated using the arithmetic mean weighted by capitalization.
The Madrid Stock Exchange General index
The IBEX 35
Management or active Passive managementThere are many experts who believe in a more or less distant future, not is it will invest in values, but in indexes (in fact today by means of funds, is partly what I do). So much of new financial products, used as a reference several indices of bags from around the world and linked with them the profitability of the saver can get. Is likely that in that next future them investors only have to choose an index and raise is if opt by a management passive of the index chosen or prefer a management active. In the first case, it would make a portfolio with the same index and in amounts equal to their weighting values. Thus we will achieve a similar to the chosen index profitability, which should only deduct the costs of management. In the second case, it would opt for a portfolio that it beat the profitability of the index, without subjecting us to greater risks. A bet difficult of achieving in certain occasions and logically with higher costs of management.
What is it?It is an index that began publication in January 1991, although its history started in 87 with the name of Fixx. As its number indicates is composed of 35 selected values, of the Madrid Stock Exchange, which has greater market capitalization and trading volume. Is it reviewed every six months.
How is it calculated?In this case not is the average arithmetic of the evolution of them 35 values that it make up.
To determine the weight of each value in the index, you consider the floating capital ("frree float") of each value and not market capitalisation.
The values of the Ibex whose free float is lower to the 50 percent, computed depending on a scale decreasing that goes from the 75 to the 10 per cent, and not by the 100 by hundred as until that time. Its base is 3000 set on December 31, 1989.
What is it?Serves to measure the behavior of the market and compare it with the evolution of a value or a portfolio of values determined. The Ibex 35 was born also, to serve of support to them contracts of products derivatives (options and future) on indices.
Values and weighting of Ibex-35Attention that the first five values have a weight greater than 60 percent of the Ibex 35. Of what they do depends on the evolution of the index, because among them others 30 barely reach the 40 per cent.
Review every six monthsThe Ibex 35 is reviewed every six months. Since its inception, nearly half of the values were renewed, both by the arrival of new titles and by merging some of them. There is a Technical Advisory Committee, chaired by the head of the service of studies of the Bolsa de Madrid, which is which analyzes the output and input values of the index. This Committee has in has several factors at the time of incorporating a new value: good representativeness in terms of capitalization stock market and volume of negotiation; values with a number of actions in the market so that the market capitalization of the index allows hedging strategy and arbitration in the products on the Ibex 35 market. The incorporation to this index usually rigged an increase of negotiation immediately occur, since many managers have to buy titles of all and each one of the values that compose it to replicate the Ibex 35 (saw it in 'active management or passive management').
However early premiere in this index tends to be bearish in the quotation for this value. Admittedly, the expectation of a certain value entry in the Ibex 35 also tends to rig a bullish movement (do you remember a saying that I tend to repeat quite often?: buy with the rumor, sell the news).
Index Dow Jones
What is it?The Dow Jones index of industrial values began to be published on May 26, 1896, and includes the most important values of the New York Stock Exchange. Originally had 12 values, then pass to 20 and in 1928 came to the 30 current. The last change in its Constitution was in March 1997 when he entry to banks and high-tech companies.
How is calculated?Unlike the Ibex 35 index and other indices, Dow Jones does not takes into account market capitalization of its values. And therefore, not gives more value to the evolution of a title that to it from another. In 1896 began to calculate is starting from the sum of the quotes of those values. Now the divider is set taking in has the division of the Nominal ("split"), them powers of actions free...
What is it?The capitalization of the values that compose it represents around a quarter of Wall Street and is understood to be a reference to know the trend of other bags. Indeed, the index Dow Jones Industrial brand in its output the trend that continue them large bags, among them the Spanish. If an index is a point of reference, the Dow Jones it is by excellence.
Data curious (the bag and the long term)
|* 100 points||on January 12, 1906|
|* 1,000 points||14 of November of 1972|
|* 2,000 points||on January 8, 1987|
|* 3,000 points||on April 17, 1991|
|* 4,000 points||23 of February of 1995|
|* 6,000 points||on October 14, 1996|
|* 8,000 points||16 of July of 1997|
|* 10,000 points||on April 24, 1999|
|Highest level||11,733 (14 January 2000)|
|Last quote||11.015 (25 May 2001)|
The 30 valuesThe index does not consider the weighting of each value. The "weight" is the sum of all contributions between the price of each value.
|IBM||6.82||J.P. Morgan Chase||2.89|
|United Technologies||4.90||Kodak Eastsman||2.78|
|Procter & Gamble||3.70||SBC Comunt||2.51|
|General Motors||3.28||International Paper||2.27|
|Wal mart Stores||3.09||Hewlett Packard||1.78|
How to operate these indexes Dow jones industrials (dj)Is an index composed by them thirty companies industrial of greater size admitted to quote in the bag of New York (NYSE). It is calculated with simple arithmetic mean of prices. Despite the small number of companies that comprise it, the DJ has proven useful as a reflection of the tendency of the market shortened term, showing, however, as a guide unreliable in the long term, in that it only reflects the evolution of the larger companies and without taking into account dividends.
What is the Nasdaq?The market of values Nasdaq is created in 1971, and was the first market of values electronic, making is in the model for those markets in development in all the world. It is a virtual structure that allows the purchase sale of shares and financial assets through computers. Today, nearly 5,000 companies - which include both small businesses in the process of growth and many companies whose names have become universally known trading values under this scheme e.
He employment from Nasdaq of the technology more advanced in communications and information and its system of "Market Makers" or creators of markets competitive, it distinguished of a bag conventional. Them investors already not need find is face to face to negotiate values, and the competition between them "Market Makers" benefits to the investors. These "Market Makers" are firms that belong to the Nasdaq, which bought and sold shares of instantly at the best purchase and sale prices available through a vast computer network that connected companies of values around the world. These firms must comply with any special requirements in terms of capital, as well as other rules and strict regulations. For example:
- Guarantee of execution of each order at the best price possible existing.
- Commitment to buy and sell the securities for which create markets.
- Obligation of reporting publicly of the price and volume of each operation in a margin of 90 seconds.
Currently, many well-known American companies elect to Nasdaq, including: Adobe Systems, Amazon.com, Microsoft, Cisco, Dell Computer Corporation, Costco Companies, Food Lion, Intel Corporation, Netscape Comunications Corporation, Reuters Group and Yahoo!.
As all market of values, the Nasdaq has several indices stock that represent the situation average of the market (expressed in levels or in percentages the value average of the actions listed):
Nasdaq composite indexThis index measures the value of market of all the actions American and foreign that are listed in the market of values Nasdaq. It is produced by the average weighted of all the shares traded. The variations of price of each value produce an increase or a decrease of the index in proportion to its weighting within the market. The Nasdaq Composite Index is composite by eight subscripts corresponding to sectors specific: banking, biotechnology, computer, finance, companies industrial, insurance, telecommunications and transport.
During the last year the index of Nasdaq has had movements abrupt to the stands and to the low. Up to April this year, the Nasdaq climbed and climbed v climbed to historic roofs, driven by a speculative wave generated by dot-com fever. This wave was incoherent, since all them dotcom climbed simply by be dotcom, all which invested in this type of companies were winning and when an investor puts his money and always win, lose the discipline of investment and the incentive economic for them entrepreneurs also is negative.
Nikkei stock averageIt includes 225-listed companies in the Japanese market. It is calculated by the same system as the DJ.
TopixIs the more complete of the indexes Japanese. It is calculated using the arithmetic mean weighted by capitalization of all companies listed on the first section of the stock market in Tokyo (about 1250). It has 33 sector indexes.
FT - IS 100 (fotsie).He is calculated through a capitalization-weighted arithmetic mean, and includes the 100 largest companies listed on the London market. It serves underlying for the London Exchange Security options and futures on the LIFFE.
FT - 30It is an index on a selection of 30 British companies quoted on the London Stock Exchange, and, like the Footsie, is drawn up by the Financial Times. It is calculated using geometric mean, causing deviations in the long term.
DAXIt is the main indicator of the German market. He is calculated via arithmetic mean weighted by capitalization of the 30 values quoted in Frankfurt with greater capitalization and recruitment.
The Madrid Stock Exchange General index.Is is of an index of prices that measures the profitability obtained by the variation in the price of them actions, corrected by the effect of the extensions and dividends.
Is composed by a set of companies that belong to different sectors: banks and financial, electrical, power, construction, investment. Metal-metal, petroleum and chemical, communications and other industries, and services.
Each year revising the composition of the TOC according to criteria of liquidity and frequency of recruitment.
The IBEX 35.It is the index the continuous market of the Spanish stock exchange official, being calculated, published and disseminated in real time by the society of bags, S. a..
The Ibex 35 is the official index of continuous market of the Spanish stock exchange. It are the quotes of the 35 companies more liquid of the market weighted by the capitalization. I.e., a company will have more weight in the formation of the index as more is its capitalization stock. Of this form the Ibex 35 would reflect a portfolio composed by a number of shares of each company proportional to the capitalization of each an of them.
It is a weighted by capitalization index comprising the 35 most liquid companies among which are traded on the continuous market of the four Spanish stock exchanges.
The Ibex 35 was created the 29 of December of 1989, establishing is for that day a rate of 3000 points. That day, the index General of a bag of Madrid (IGBM) was of 296.8%.
Yes well the IGBM keeps relationship with the value nominal of the actions that it form, the set the index of the Ibex in 3000 not has a reason mathematical. It became simply by proportionality which kept with the IGBM. It is therefore a unique reference data, and therefore, it only makes sense to be compared between different sessions.
The Ibex 35 was born with a double need:
Reflect with fidelity the behavior of the market de renta variable Spanish.
Serve as underlying for the hiring of futures and options. This will be one of them points that will try to more forward, to explain the mechanisms of arbitration and coverage with values of the index and with the own index.
CompositionAccording to the rules that govern society of bags, the Ibex 35 index is composed of the 35 values quoted in the system of stock market interconnection of the four Spanish bags that have the largest volume of recruitment in pesetas effective, discounting the resulting volumes of special operations during the control period. To these effects,
Are considered operations special those that involve a change in the shareholding stable of a society.
Be considered as period of control of the values included in the index:
Concerning ordinary revisions, the interval of six months counting from the seventh month prior to the beginning of the term natural.
Respect of extraordinary reviews, that the Technical Advisory Committee, on the proposal of the administrator of the index, consider most representative. More forward is explained the functions of both figures.
Without prejudice of the criteria general of belonging to the Ibex 35, the Manager of the index may, at any time. to the Advisory Committee to propose technical exclusion - or non-inclusion - of the values that comply with any of the following circumstances.
Much of its volume traded during the scrutiny period.
You have been hired by a single company or agency securities and Exchange,
Has been carried out in few transactions,
Has been carried out during a period of time considered as little representative for the Manager.
That its negotiated volume suffers a decline that the manager considers that the liquidity of the value is seriously affected.
That has been suspended from trading and stock trading for a period of time deemed significant by the Manager.
AnnexesPrecio-Utilidad.- this index allows to project how many periods (years) the investor will have to wait to recover their investment, if 100% of the annual profits of the company are distributed. Is obtained by dividing the price of market of the action for the utilities by action; This figure of earnings per share is obtained by dividing the net profit for the 12 months to the number of shares in circulation.
Value for money in books-this indicator compares the price of market of the action with its value heritage registered in books. It is calculated by dividing the market price for the value in books of the action; the book value of the action is equal to the heritage of the company divided to the number of shares in circulation.
Dividendo-Precio.-This performance It is given in percentage, and represents the return that the investor has received through dividends in cash that the company has distributed to its shareholders. Is obtained to the divide the amount in cash for action for the price of market; This amount corresponds to the total of dividends distributed in the last 12 months.
Capitalization- represents the price of market of the company CA. Its formula is the last sucres price multiplied by the number of shares outstanding.
Stock market-presence It shows the frequency with which action has been negotiated for the wheels of the last year. Is calculated dividing the number of wheels in that it action was negotiated during the last 12 months for the number of wheels total in the same period. This presence is recorded in the bag where the issuer is more liquid.
Index of rotation- This index shows the frequency with that the actions of a same capital will have negotiated. The number of shares traded during the last year is divided to the number of shares in circulation. To calculate this index, is the number of shares negotiated at the national level.
Last price. It is the latest official price quoted on the stock exchange where the issuer is more fluid.
Number of shares in circulation-for convert the capital in an only value nominal, whenever the actions have them same rights, is analyzes first what value nominal is more liquid. Then, the less liquid are converted in shares of value rated more liquid, and is added all.
Rotation rate-the number of traded shares and the number of shares corresponds to the most liquid shares.
Presence stock-contemplates the liquidity of the company, without observing the value nominal to which corresponds.
Last price.-is the last price official of the actions of value rated more liquid quoted in the Market Values where the emitter has greater presence.
ConclusionsThem indices stock represent a tool fundamental in them markets financial both by their utility as indicators of market as by its function of active underlying in the negotiation of products derived.
When the most powerful companies in the world such as Enron, Arthor, Anderson, Worldcom, Xerox, Vivandi Merck (the list of financial scandals extends and seems to have no end), have problems investors lose confidence and therefore they do not invest make shake the world financial and therefore to other stock exchanges outside the United States.
Today, the stock market world have been transformed into a "mercado continuo" global and interconnected, where the direction of each bag has an impact to greater or lesser degree, in the March of the other progression globalization makes international stock indices the best instruments to prevent or anticipate surprises in the domestic equity markets.