Stocks Exchang

‫بسم ال الرحمن الرحیم‬

Prepared by: Dr Mirwais Khaleel Safi

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Prepared by: Dr Mirwais Khaleel Safi

Stocks • A stock is a certificate that certifies ownership of a certain portion of a firm. • When a firm issues new shares of stock, it does not add to its debt. Instead, it brings in additional “owners” who supply it with funds.

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Prepared by: Dr Mirwais Khaleel Safi

Stocks • Most stocks bought and sold on the stock market daily are not newly issued but issued long ago, when the firm “goes public.” 12/15/08

Prepared by: Dr Mirwais Khaleel Safi

A stock is a certificate that certifies ownership of a certain portion of a firm.

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Prepared by: Dr Mirwais Khaleel Safi

A stock is a certificate that certifies ownership of a certain portion of a firm.

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Prepared by: Dr Mirwais Khaleel Safi

Stocks • Stockholders have a right to select the management of the firm and to share in its profits. • Unlike bonds or direct borrowing, stocks do not promise a fixed annual payment. Returns depend on company performance. If profits are high, the firm may pay dividends=‫‌سودسهام‬ 12/15/08

Prepared by: Dr Mirwais Khaleel Safi

‫‪Types of Stocks‬‬ ‫سهم معمولی ‪1. Common Stock:‬‬ ‫سهم امتیازی ‪2. Preferred Stock:‬‬ ‫‪ .1‬سهام داران سهم معمولی حق انتخاب هیـّت مدیره را دارند‬ ‫اما سهام داران امتیازی این حق را ندارند‪.‬‬ ‫‪ .2‬به اسهام امتیازی سالنه یک سود معین پرداخته میشود‪.‬اما‬ ‫به اسهام معمولی یک(سود سهام‌ ) ‪ Dividends‬نظر به‬ ‫مفاد حاصله پرداخت میگردد‪.‬‬ ‫‪ .3‬در صورت انحلل کارپوریشن اول پول سهم امتیازی‬ ‫پرداخته میشود“ بعدآ به سهم معمولی پرداخته میشود‪.‬‬

‫‪Prepared by: Dr Mirwais Khaleel Safi‬‬

Stock exchange • A stock exchange, share market or bourse is a corporation or mutual organization which provides "trading" facilities for stock brokers and traders, to trade stocks and other securities. Stock exchanges also provide facilities for the issue and redemption of securities as well as other financial instruments and capital events including the payment of income and dividends.

Prepared by: Dr Mirwais Khaleel Safi

Stock market • A stock market, or (equity market), is a private or public market for the trading of company stock and derivatives ‫ ‌مشتق‬of company stock at an agreed price; these are securities ‫ اوراق بهادار‬listed on a stock exchange as well as those only traded privately.

Prepared by: Dr Mirwais Khaleel Safi

History of stock exchanges • In 11th century France the courtiers de change were concerned with managing and regulating the debts of agricultural communities on behalf of the banks. As these men also traded in debts, they could be called the first brokers. • Some stories suggest that the origins of the term "bourse" come from the Latin bursa meaning a bag because, in 13th century Bruges, the sign of a purse (or perhaps three purses), hung on the front of the house where merchants met.

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Prepared by: Dr Mirwais Khaleel Safi

The role of stock exchanges Stock exchanges have multiple roles in the economy, this may include the following:[1] 1. Raising capital for businesses •

The Stock Exchange provides companies with the facility to raise capital for expansion through selling shares to the investing public.[2]

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Prepared by: Dr Mirwais Khaleel Safi

The role of stock exchanges 2. Mobilizing savings for investment When people draw their savings and invest in shares, it leads to a more rational allocation of resources because funds, which could have been consumed, or kept in idle deposits with banks, are mobilized and redirected to promote business activity with benefits for several economic sectors such as agriculture, commerce and industry, resulting in a stronger economic growth and higher productivity levels and firms. 12/15/08

Prepared by: Dr Mirwais Khaleel Safi

The role of stock exchanges 3. Facilitating company growth •

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Companies view acquisitions as an opportunity to expand product lines, increase distribution channels, hedge against volatility, increase its market share, or acquire other necessary business assets. A takeover bid or a merger agreement through the stock market is one of the simplest and most common ways for a company to grow by acquisition or fusion. Prepared by: Dr Mirwais Khaleel Safi

The role of stock exchanges 4. Redistribution of wealth •

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Stocks exchanges do not exist to redistribute wealth. However, both casual and professional stock investors, through dividends and stock price increases that may result in capital gains, will share in the wealth of profitable businesses

Prepared by: Dr Mirwais Khaleel Safi

The role of stock exchanges 5. Corporate governance •

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By having a wide and varied scope of owners, companies generally tend to improve on their management standards and efficiency in order to satisfy the demands of these shareholders and the more stringent rules for public corporations imposed by public stock exchanges and the government Prepared by: Dr Mirwais Khaleel Safi

The role of stock exchanges 6. Creating investment opportunities for small investors •

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As opposed to other businesses that require huge capital outlay, investing in shares is open to both the large and small stock investors because a person buys the number of shares they can afford. Therefore the Stock Exchange provides the opportunity for small investors to own shares of the same companies as large investors Prepared by: Dr Mirwais Khaleel Safi

The role of stock exchanges 7. Government capital-raising for development projects •

Governments at various levels may decide to borrow money in order to finance infrastructure projects such as sewage and water treatment works or housing estates by selling another category of securities known as bonds. These bonds can be raised through the Stock Exchange whereby members of the public buy them, thus loaning money to the government. The issuance of such bonds can obviate the need to directly tax the citizens in order to finance development, although by securing such bonds with the full faith and credit of the government instead of with collateral, the result is that the government must tax the citizens or otherwise raise additional funds to make any regular coupon payments and refund the principal when the bonds mature. 12/15/08

Prepared by: Dr Mirwais Khaleel Safi

The role of stock exchanges 8. Barometer of the economy •

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At the stock exchange, share prices rise and fall depending, largely, on market forces. Share prices tend to rise or remain stable when companies and the economy in general show signs of stability and growth. An economic recession, depression, or financial crisis could eventually lead to a stock market crash. Therefore the movement of share prices and in general of the stock indexes can be an indicator of the general trend in the economy.

Prepared by: Dr Mirwais Khaleel Safi

Determining (‫تعيين كردن‬ ‌ (‌ the Price of a Stock • Things that are likely to affect the price of a stock include: • What people expect its future dividends will

be • When the dividends are expected to be paid • The amount of risk involved

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Prepared by: Dr Mirwais Khaleel Safi

Determining (‫تعيين كردن‬ ‌ (‌ the Price of a Stock • The amount by which future dividends (‫ سود‬،‫سودسهام‬ ‌ ( are discounted depends on the interest rate. The larger the interest rate, the more will expected future dividends be discounted.

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Interest rate Amount today Pays one year from now

10% 5% $100 $104.76 $110

$110

Prepared by: Dr Mirwais Khaleel Safi

Determining (‫تعيين كردن‬ ‌ (‌ the Price of a Stock • The amount by which future dividends are discounted is greater when the possibility of obtaining dividends from a firm is more uncertain.

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Prepared by: Dr Mirwais Khaleel Safi

Determining (‫تعيين كردن‬ ‌ (‌ the Price of a Stock • Thus we can say that the price of a stock should equal the discounted value (‫ارزش‬ ‫ (تنزيل شده‬of its expected future dividends, where the discount factors depend on the interest rate and risk. • Announcements of higher expected future dividends or perceived lower risk should increase the firm’s stock price. 12/15/08

Prepared by: Dr Mirwais Khaleel Safi

Determining (‫تعيين كردن‬ ‌ (‌ the Price of a Stock • The price of a stock may also be driven up not by the discounted value of expected future dividends, but by people’s views of what others will pay for the stock in the future. • One might call this a bubble because the stock price depends on what people expect that other people expect, etc.‫مردم‬ ‫هم اکثراُ سر هر چيزی که بيروبار باشد همان را‬ ‫ميخرند‬ 12/15/08

Prepared by: Dr Mirwais Khaleel Safi

Major stock exchanges Market Value

Total Share Turnover

)trillions of US dollars(

)trillions of US dollars(

JSE Securities Exchange

$0.940

$0.349

NASDAQ

$4.39

$12.4

São Paulo Stock Exchange

$1.40

$0.476

Toronto Stock Exchange

$2.29

$1.36

NYSE Euronext

$20.7

$28.7

Australian Securities Exchange

$1.453

$1.003

Bombay Stock Exchange

$1.61

$0.263

Hong Kong Stock Exchange

$2.97

$1.70

Korea Exchange

$1.26

$1.66

Stock Exchange

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Prepared by: Dr Mirwais Khaleel Safi

Major stock exchanges Stock Exchange

Market Value )trillions of US dollars(

Total Share Turnover )trillions of US dollars(

National Stock Exchange of India

$1.46

$0.564

Shanghai Stock Exchange

$3.02

$3.56

Shenzhen Stock Exchange

$0.741

$1.86

Tokyo Stock Exchange

$4.63

$5.45

Frankfurt Stock Exchange )Deutsche Börse(

$2.12

$3.64

London Stock Exchange Madrid Stock Exchange )Bolsas y Mercados Españoles(

$4.21

$9.14

$1.83

$2.49

Milan Stock Exchange )Borsa Italiana(

$1.13

$1.98

Moscow Interbank Currency Exchange )MICEX(

$0.9652

$0.4882

Nordic Stock Exchange Group OMX1

$1.38

$1.60

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Swiss Exchange

$1.58 Safi Prepared by:$1.33 Dr Mirwais Khaleel

The Stock Market Since 1948 • Dow Jones Industrial Average Index:‫شاخص‬ • An index based on the stock prices of 30

actively traded large companies. The oldest and most widely followed index of stock market performance. ‫مثال شاخص ها در افغانستان‬: ‫طل –عربی‬ ‫پخته –هلمندی‬ ‫قالين –اقچه يی‬

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Prepared by: Dr Mirwais Khaleel Safi

The Stock Market Since 1948

• NASDAQ Composite Index:

• An index based on the stock prices of over

5,000 companies traded on the NASDAQ stock market. The NASDAQ market takes is name from the National Association of Securities Dealers Automated Quotation System. ‫انجمن ملی فروشنده گان اوراق بها دار (اسهام) توسط سیستم‬ NASDAQ ‫اوتومات قیمت گزاری‬.

Type

Stock exchange

Location

Times street New York City, United States

Owner

the NASDAQ OMX Group

Key people Currency No. of listings 12/15/08

Robert Greifeld )CEO( H. Furlong Baldwin )Chairman( USD 3,200

Prepared by: Dr Mirwais Khaleel Safi

NYSE

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‫بازار سهام نيويارک يا‬

Prepared by: Dr Mirwais Khaleel Safi

The Stock Market Since 1948 • Standard and Poors 500 (S&P 500) Index: • An index based on the stock prices of the

largest 500 firms traded on the New York Stock Exchange )NYSE(, the NASDAQ stock market, and the American Stock Exchange.ASE

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Prepared by: Dr Mirwais Khaleel Safi

The Stock Market Since 1948 • From a macroeconomic perspective, ‫ چشم انداز‬the Dow Jones Industrial Average and the NASDAQ index cover too small a sample of firms. • A better measure of the market value of all firms in the economy is the Standard and Poors 500 stock price index, called the S&P 500.

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Prepared by: Dr Mirwais Khaleel Safi

The Stock Market and the Economy • boom (‫رونق گرفتن‬، ‫جهش اقتصادى= (ترقى کردن‬

• The stock market boom of the last half of the 1990s had a large impact on the economy. • How much of the economic growth was due

to the stock market boom? • Did the economy in fact enter a new age?

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Prepared by: Dr Mirwais Khaleel Safi

The S&P 500 Stock Price Index, 1948 I – 2002 III

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Prepared by: Dr Mirwais Khaleel Safi

The Stock Market Since 1948 • Between 1995 and 2000, the S&P 500 index rose 226 percent, an annual rate of 25 percent! • This is by far the largest stock market boom ‫رونق گرفتن‬، ‫ ترقى کردن‬in U.S. history. This boom added $14 trillion to household ‫خانه‬ ‫ وار‬wealth, about $2.5 trillion per year. (25,000,000,000,000) 12/15/08

Prepared by: Dr Mirwais Khaleel Safi

The Stock Market Since 1948 • The stock market boom cannot be explained by a large fall in interest rates, higher profits, or a fall in the perceived riskiness of stocks. This led many people to the view that it was simply a bubble. • Millions of lives were affected by the euphoria ‫ خوشي‬،‫رضامندي‬ ‌ ‌ of the boom and the “correction” that followed. 12/15/08

Prepared by: Dr Mirwais Khaleel Safi

Growth Rate of S&P 500 Earnings, 1948 I – 2002 III

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Prepared by: Dr Mirwais Khaleel Safi

Stock Market Effects on the Economy • An increase in stock prices causes an increase in wealth, and consequently an increase in consumer spending. • Investment is also affected by higher stock prices. With a higher stock price, a firm can raise more money per share to finance investment projects.

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Prepared by: Dr Mirwais Khaleel Safi

Key Terms and Concepts stock capital gain Dow Jones Industrial Average Index NASDAQ Composite Index realized capital gain Standard and Poors 500 (S&P 500) Index 12/15/08

Prepared by: Dr Mirwais Khaleel Safi

Poor Millionaires of Zimbabwe A period of continuous uncontrolled rise in prices of goods in an economy is called inflation.

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Prepared by: Dr Mirwais Khaleel Safi

Poor Millionaires of Zimbabwe ( money inflation )

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Prepared by: Dr Mirwais Khaleel Safi

Poor Millionaires of Zimbabwe ( money inflation )

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Prepared by: Dr Mirwais Khaleel Safi

Poor Millionaires of Zimbabwe ( money inflation )

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Prepared by: Dr Mirwais Khaleel Safi

Poor Millionaires of Zimbabwe ( money inflation )

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Prepared by: Dr Mirwais Khaleel Safi

Poor Millionaires of Zimbabwe ( money inflation )

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Prepared by: Dr Mirwais Khaleel Safi

Poor Millionaires of Zimbabwe ( money inflation )

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Prepared by: Dr Mirwais Khaleel Safi

Poor Millionaires of Zimbabwe ( money inflation )

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Prepared by: Dr Mirwais Khaleel Safi

Poor Millionaires of Zimbabwe ( money inflation )

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Prepared by: Dr Mirwais Khaleel Safi

Thank You for Attention

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Prepared by: Dr Mirwais Khaleel Safi