Gitman投资学基础ch02-PPT课件.pptx

Copyright 2011 Pearson Prentice Hall.All rights reserved.2-1 Securities Markets and TransactionsLearning Goals1.Identify the basic types of securities markets and describe their characteristics.2.Explain the initial public offering(IPO)process.3.Describe broker and dealer markets,and discuss how they differ from alternative trading systems.Copyright 2011 Pearson Prentice Hall.All rights reserved.2-2 Securities Markets and TransactionsLearning Goals(contd)4.Review the key aspects of the globalization of securities markets,and discuss the importance of international securities markets.5.Discuss trading hours and regulation of securities markets.6.Explain long purchases,margin transactions and short sales.Copyright 2011 Pearson Prentice Hall.All rights reserved.2-3 Types of MarketsMoney Markets:the market where short-term securities are bought and soldCapital Market:the market where long-term securities such as stocks and bonds are bought and soldPrimary Market:the market in which new issues of securities are sold to the publicSecondary Market:the market in which securities are traded after they have been issuedCopyright 2011 Pearson Prentice Hall.All rights reserved.2-4 Primary MarketsInitial Public Offering(IPO)First public sale of a companys stockRequires SEC approvalThree Choices to Market Securities in Primary MarketPublic offeringRights offeringPrivate Placement Copyright 2011 Pearson Prentice Hall.All rights reserved.2-5 Table 2.1 Annual IPO Data,19992008Copyright 2011 Pearson Prentice Hall.All rights reserved.2-6 Going Public:The IPO ProcessUnderwriting the offering:promoting the stock and facilitating the sale of the companys sharesProspectus:registration statement describing the issue and the issuerRed Herring:preliminary prospectus available during the waiting periodQuiet Period:time period after prospectus is filed when company must restrict what is said about the companyRoad Show:series of presentations to potential investorsCopyright 2011 Pearson Prentice Hall.All rights reserved.2-7 Figure 2.1 Cover of a PreliminaryProspectus for a Stock IssueCopyright 2011 Pearson Prentice Hall.All rights reserved.2-8 The Investment Bankers RoleUnderwriting the Issue:purchases the security at agreed-on price and bears the risk of reselling it to the publicUnderwriting Syndicate:group formed by investment banker to share the financial risk of underwritingSelling Group:other brokerage firms that help the underwriting syndicate sell issue to the publicTombstone:public announcement of issue and role of participants in underwriting processInvestment Banker Compensation:typically in the form of a discount on the sale price of the securitiesCopyright 2011 Pearson Prentice Hall.All rights reserved.2-9 Figure 2.2 The Selling Process for a Large Security IssueCopyright 2011 Pearson Prentice Hall.All rights reserved.2-10 Secondary MarketsSecondary Market:the market in which securities are traded after they have been issued Role of Secondary MarketsProvides liquidity to security purchasersProvides continuous pricing mechanismSecurities Exchanges:forums where buyers and sellers of securities are brought together to execute tradesNasdaq Market:employs an all-electronic trading platform to execute tradesOver-the-counter(OTC)Market:involves trading in smaller,unlisted securitiesCopyright 2011 Pearson Prentice Hall.All rights reserved.2-11 Broker Markets and Dealer MarketsBroker Markets:consists of national and regional securities exchanges60%of the total dollar volume of all shares in U.S.stock market trade hereNew York Stock Exchange(NYSE)is largest and most well-knownTrades are executed when a buyer and a seller are brought together by a broker and the trade takes place directly between the buyer and sellerDealer Markets:consists of both the Nasdaq market and the OTC marketTrades are executed with a dealer(market maker)in the middle.Sellers sell to a market maker at a stated price.The market maker then offers the securities to a buyer.Copyright 2011 Pearson Prentice Hall.All rights reserved.2-12 Figure 2.3 Broker and Dealer MarketsCopyright 2011 Pearson Prentice Hall.All rights reserved.2-13 Broker MarketsNew York Stock Exchange(NYSE)Largest stock exchangeover 2,700 companiesOver 350 billion shares of stock traded in 2005Accounts for 90%of stocks traded on exchangesSpecialists make transactions in key stocksStrictest listing policies NYSE Amex(formally American Stock Exchange)More than 500 companies listedMajor market for Exchange Traded FundsTypically smaller and younger companies who cannot meet stricter listing requirements for NYSECopyright 2011 Pearson Prentice Hall.All rights reserved.2-14 Broker Markets(contd)Regional Stock ExchangesTypically lists between 100500 companies,usually with local and regional appealListing requirements are more lenient than NYSEOften include stocks that are also listed on NYSE or NYSE AmexBest-known:Midwest,Pacific,Philadelphia,Boston,and CincinnatiOptions ExchangesAllows trading of optionsBest-known:Chicago Board Options Exchange(CBOE)Futures ExchangesAllows trading of financial futuresBest-known:Chicago Board of Trade(CBT)Copyright 2011 Pearson Prentice Hall.All rights reserved.2-15 Dealer MarketsNo centralized trading floor;comprised of market makers linked by telecommunications network Both IPOs and secondary distributions are sold on OTC40%of the total dollar volume of all shares in U.S.stock market trade hereBoth IPOs and secondary distributions are sold on OTCBid Price:the highest price offered by market maker to purchase a given securityAsk Price:the lowest price at which a market maker is willing to sell a given securityCopyright 2011 Pearson Prentice Hall.All rights reserved.2-16 Dealer MarketsNasdaqLargest dealer marketLists large companies(Microsoft,Intel,Dell,eBay)and smaller companiesOver-the-counter(OTC)Bulletin BoardLists smaller companies that cannot or dont wish to be listed on NasdaqCompanies are regulated by SECOver-the-counter(OTC)Pink SheetsLists smaller companies that are not regulated by SECLiquidity is minimal or almost non-existentVery risky;many nearly worthless stocksCopyright 2011 Pearson Prentice Hall.All rights reserved.2-17 Alternative Trading SystemsThird MarketLarge institutional investors go through market makers that are not members of a securities exchangeInstitutional investors(mutual funds,life insurance companies,pension funds)receive reduced trading costs due to large size of transactionsFourth MarketLarge institutional investors deal directly with each other to bypass market makersElectronic Communications Networks(ECNs)allow direct tradingECNs most effective for high-volume,actively traded securitiesCopyright 2011 Pearson Prentice Hall.All rights reserved.2-18 General Market ConditionsBull MarketFavorable marketsRising pricesInvestor/consumer optimismEconomic growth and recoveryGovernment stimulusBear MarketUnfavorable marketsFalling pricesInvestor/consumer pessimismEconomic slowdownGovernment restraintCopyright 2011 Pearson Prentice Hall.All rights reserved.2-19 Globalization of Securities MarketsDiversification:the inclusion of a number of different investment vehicles in a portfolio to increase returns or reduce risksUse of International Securities Improves DiversificationMore industries and securities availableSecurities denominated in different currenciesOpportunities in rapidly expanding economies International Investment PerformanceOpportunities for high returnsForeign securities markets do not necessarily move with the U.S.securities marketForeign securities markets tend to be more risky than U.S.marketsCopyright 2011 Pearson Prentice Hall.All rights reserved.2-20 Globalization of Securities Markets(contd)Indirect Ways to Invest in Foreign SecuritiesPurchase shares of U.S.-based multinational with substantial foreign operationsDirect Ways to Invest in Foreign SecuritiesPurchase securities on foreign stock exchangesBuy securities of foreign companies that trade on U.S.stock exchangesBuy American Depositary Receipts(ADRs):dollar denominated receipts for stocks of foreign companies held in vaults of banksCopyright 2011 Pearson Prentice Hall.All rights reserved.2-21 Risks of International InvestingUsual Investment Risks Still ApplyGovernment Policies RisksUnstable foreign governmentsDifferent laws in trade,labor or taxationDifferent economic and political conditionsLess stringent regulation of foreign securities marketsCurrency Exchange Rate RisksValue of foreign currency fluctuates compared to U.S.dollarValue of foreign investments can go up and down with exchange rate fluctuationsCopyright 2011 Pearson Prentice Hall.All rights reserved.2-22 Trading Hours of Securities MarketsRegular Trading Session for U.S.Exchanges and Nasdaq9:30 A.M.to 4:00 P.M.Eastern timeExtended-Hours Electronic-Trading SessionsNYSE:4:15 to 5:00 P.M.Eastern timeNasdaq:4:00 P.M.to 6:30 P.M.Eastern timeRegional exchanges also have after-hours trading sessionsOrders only filled if matched with identical opposing ordersCopyright 2011 Pearson Prentice Hall.All rights reserved.2-23 Regulation of Securities Markets Insider TradingUse of nonpublic information about a company to make profitable securities transactionsBlue Sky LawsLaws imposed by individual states to regulate sellers of securitiesIntended to prevent investors from being sold nothing but“blue sky”Copyright 2011 Pearson Prentice Hall.All rights reserved.2-24 Regulation of Securities MarketsSecurities Act of 1933 Required full disclosure of information by companiesSecurities Act of 1934Established SEC as government regulatory bodyMaloney Act of 1938Allowed self-regulation of securities industry through trade associations such as the National Association of Securities Dealers(NASD)Investment Company Act of 1940Created®ulated mutual fundsCopyright 2011 Pearson Prentice Hall.All rights reserved.2-25 Regulation of Securities MarketsInvestment Advisors Act of 1940Required investment advisers to make full disclosure about their backgrounds and their investments,as well as register with the SECSecurities Acts Amendments of 1975Abolished fixed-commissions and established an electronic communications network to make stock pricing more competitiveInsider Trading and Fraud Act of 1988Prohibited insider trading on nonpublic informationSarbanes-Oxley Act of 2002Tightened accounting and audit guidelines to reduce corporate fraudCopyright 2011 Pearson Prentice Hall.All rights reserved.2-26 Basic Types of Securities TransactionsLong Purchase Investor buys and holds securities“Buy low and sell high”Make money when prices go upCopyright 2011 Pearson Prentice Hall.All rights reserved.2-27 Basic Types of Securities Transactions(contd)Margin TradingUses borrowed funds to purchase securitiesCurrently owned securities used as collateral for margin loan from brokerMargin requirements set by Federal Reserve BoardDetermines the minimum amount of equity requiredOn$4,445 purchase with 50%margin requirement,investor puts up$2,222.50 and broker will lend remaining$2,222.50Can be used for common stocks,preferred stocks,bonds,mutual funds,options,warrants and futuresCopyright 2011 Pearson Prentice Hall.All rights reserved.2-28 Table 2.4 Initial Margin Requirements for Various Types of SecuritiesCopyright 2011 Pearson Prentice Hall.All rights reserved.2-29 Margin Trading Advantages Allows use of financial leverage Magnifies profits Disadvantages Magnifies losses Interest expense on margin loan Margin callsCopyright 2011 Pearson Prentice Hall.All rights reserved.2-30 Margin FormulasBasic Margin FormulaExample of Using MarginCopyright 2011 Pearson Prentice Hall.All rights reserved.2-31 Table 2.3 The Effect of Margin Trading on Security ReturnsCopyright 2011 Pearson Prentice Hall.All rights reserved.2-32 Margin Formulas(contd)Return on Invested CapitalExample of Return on Invested CapitalCopyright 2011 Pearson Prentice Hall.All rights reserved.2-33 Basic Types of Securities TransactionsShort SellingInvestor sells securities they dont ownInvestor borrows securities from brokerBroker lends securities owned by other investors that are held in“street name”“Sell high and buy low”Investors make money when stock prices go downCopyright 2011 Pearson Prentice Hall.All rights reserved.2-34 Short SellingAdvantages Chance to profit when stock price declinesDisadvantagesLimited return opportunities:stock price cannot go below$0.00Unlimited risks:stock price can go up anunlimited amountIf stock price goes up,short seller still needs to buy shares to pay back the“borrowed”shares to the brokerShort sellers may not earn dividendsCopyright 2011 Pearson Prentice Hall.All rights reserved.2-35 Table 2.5 The Mechanics of a Short SaleCopyright 2011 Pearson Prentice Hall.All rights reserved.2-36 Chapter 2 ReviewLearning Goals1.Identify the basic types of securities markets and describe their characteristics.2.Explain the initial public offering(IPO)process.3.Describe broker and dealer markets,and discuss how they differ from alternative trading systems.Copyright 2011 Pearson Prentice Hall.All rights reserved.2-37 Chapter 2 Review(contd)Learning Goals(contd)4.Review the key aspects of the globalization of securities markets,and discuss the importance of international securities markets.5.Discuss trading hours and regulation of securities markets.6.Explain long purchases,margin transactions and short sales.Copyright 2011 Pearson Prentice Hall.All rights reserved.Chapter 2Additional Chapter ArtCopyright 2011 Pearson Prentice Hall.All rights reserved.2-39 Table 2.2 Important Federal Securities LawsCopyright 2011 Pearson Prentice Hall.All rights reserved.2-40 Table 2.6 Margin Positions on Short Sales