The market in which shares are issued and traded either through exchanges or over-the-counter markets. Also known as the equity market, it is one of the most vital areas of a market economy as it provides companies with access to capital and investors with a slice of ownership in the company and the potential of gains based on the company's future performance. Watch: What Are Stocks? Taobiz explains Stock Market This market can be split into two main sections: the primary and secondary market. The primary market is where new issues are first offered, with any subsequent trading going on in the secondary market.
A rapid and often unanticipated drop in stock prices. A stock market crash can be the result of major catastrophic events, economic crisis or the collapse of a long-term speculative bubble. Well-known U.S. stock market crashes include the market crash of 1929 and Black Monday (1987). Taobiz explains Stock Market Crash Stock market crashes wipe out equity-investment values and are most harmful to those who rely on investment returns for retirement. Although the collapse of equity prices can occur over a day or a year, crashes are often followed by a recession or depression.
A rapid and severe downturn in stock prices that occurred in late October of 1987. After five days of intensifying stock market declines, selling pressure hit a peak on October 19, known as Black Monday. The Dow Jones Industrial Average (DJIA) fell a record 22% on that day alone, with many stocks halted during the day as order imbalances prevented true price discovery. Taobiz explains Stock Market Crash Of 1987 People speculate on the exact causes of the crash, which was rare in that the market made up most of its losses rather quickly, rather than preceding a protracted economic recession. Some people point to the lack of trading curbs, which markets have today, and automatic trading programs in place at the time as possible culprits. The lead-up to October 1987 saw the DJIA more than triple in five years, and price/earnings (P/E) multiples on stocks had reached above 20, implying very bullish sentiment. And while the crash began as a U.S. phenomenon, it quickly affected stock markets around the globe; 19 of the 20 largest markets in the world saw stock market declines of 20% or more. Investors and regulators learned a lot from the 1987 crash, specifically with regards to the dangers of automatic or program trading. In these types of programs, human decision-making is taken out of the equation, and buy or sell orders are generated automatically based on the levels of benchmark indexes or specific stocks. In a disorderly market, humans are needed more than ever to assess the situation and possibly override imprudent market thresholds.
A corporate action in which a company's existing shares are divided into multiple shares. Although the number of shares outstanding increases by a specific multiple, the total dollar value of the shares remains the same compared to pre-split amounts, because no real value has been added as a result of the split. In the U.K., a stock split is referred to as a "scrip issue", "bonus issue", "capitalization issue" or "free issue". Taobiz explains Stock Split For example, in a 2-for-1 split, each stockholder receives an additional share for each share he or she holds. One reason as to why stock splits are performed is that a company's share price has grown so high that to many investors, the shares are too expensive to buy in round lots. For example, if a XYZ Corp.'s shares were worth $1,000 each, investors would need to purchase $100,000 in order to own 100 shares. If each share was worth $10, investors would only need to pay $1,000 to own 100 shares.
An order to buy or sell a security when its price surpasses a particular point, thus ensuring a greater probability of achieving a predetermined entry or exit price, limiting the investor's loss or locking in his or her profit. once the price surpasses the predefined entry/exit point, the stop order becomes a market order. Also referred to as a "stop" and/or "stop-loss order". Taobiz explains Stop Order Investors commonly use a stop order before leaving for holidays or entering a situation where they are unable to monitor their portfolio for an extended period. Stops are not a 100% guarantee of getting the desired entry/exit points. For instance, if a stock gaps down, the trader's stop order will be triggered (or filled) at a price significantly lower than expected. Traders who use technical analysis will place stop orders below major moving averages, trendlines, swing highs, swing lows or other key support or resistance levels.
A type of security that signifies ownership in a corporation and represents a claim on part of the corporation's assets and earnings. There are two main types of stock: common and preferred. Common stock usually entitles the owner to vote at shareholders' meetings and to receive dividends. Preferred stock generally does not have voting rights, but has a higher claim on assets and earnings than the common shares. For example, owners of preferred stock receive dividends before common shareholders and have priority in the event that a company goes bankrupt and is liquidated. Also known as "shares" or "equity". Taobiz explains Stock A holder of stock (a shareholder) has a claim to a part of the corporation's assets and earnings. In other words, a shareholder is an owner of a company. Ownership is determined by the number of shares a person owns relative to the number of outstanding shares. For example, if a company has 1,000 shares of stock outstanding and one person owns 100 shares, that person would own and have claim to 10% of the company's assets. Stocks are the foundation of nearly every portfolio. Historically, they have outperformed most other investments over the long run.
The main securities market in Sweden, the Stockholm Stock Exchange was founded in 1863. In 1997, it joined the NOREX alliance, a group that also includes the stock exchanges of Oslo, Copenhagen and Iceland, as part of an effort for the Nordic exchanges to attract greater international investment through a common trading platform and streamlined regulations. Taobiz explains Stockholm Stock Exchange (STO) .ST In 1998, the Stockholm Stock Exchange merged with OMX. In 2007, it changed its name to OMX Nordic Exchange Stockholm AB. At the time of writing, it is held by the Nordic division of NASDAQ OMX, the world's largest exchange holding company. The exchange trades in equities, premium bonds, retail bonds, convertible loans, subscription rights, exchange-traded options and warrants. One of its major indexes is the market-value-weighted OMX Stockholm 30, which tracks the 30 most-traded stocks.
1. In the context of mergers and acquisitions, the exchange of an acquiring company's stock for the stock of the acquired company at a predetermined rate. Usually, only a portion of a merger is completed with a stock-for-stock transaction, with the rest of the expenses being covered with cash or other payment methods. 2. A method of satisfying the option price in an employee stock option compensation scheme. Under these compensation programs, employees are granted stock options but must pay the company the option price before they are given the grant. By exchanging mature stock (stock that has been held for a required holding period), the grantee can receive his/her options without having to pay for them. After a given time period, grantees are given back the stock they used to pay for their options. Taobiz explains Stock-For-Stock 1. For example, in order to satisfy the expenses of an acquisition, an acquiring company may use a combination of 2 for 3 stock-for-stock exchange with shareholders of the target company and a tender offer of cash. 2. Where possible, grantees often take advantage of a stock-for-stock exchange, as they usually increase a grantee's ownership position and require no cash outlay. Non-employee shareholders argue that stock-for-stock option price satisfaction adds to the already high expense of granting employees options, as the employees end up not having to pay the option price, which can add up to be a significant amount of cash if all employees granted options take advantage of stock-for-stock exercises.
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