Documente Academic
Documente Profesional
Documente Cultură
Introduction
1.
2.
1.
2.
1.
Debt Markets
Short-term (maturity < 1 year) Money Market
Long-term (maturity > 1 year) Capital Market
Equity Markets
Common stocks
Primary Market
New security issues sold to initial buyers
Secondary Market
Securities previously issued are bought and sold
Exchanges
Trades conducted in central locations (e.g., New York Stock Exchange,
Chicago Commodity)
2.
Over-the-Counter Markets
Dealers at different locations buy and sell
Daily news paper or specialized financial publication such as Wall Street Journal
or Financial Times report daily information
In addition to that, there are many stock market indices
Explaining Stock PricesStep #1: Characterize The Market
Price of a share of stocklike any other is determined in a market
Well characterize the market for a companys shares as perfectly competitive
View stock market as a collection of individual, perfectly competitive
markets for particular corporations shares
Many buyers and sellers
Virtually free entry
Step #2: Find The Equilibrium
Like all prices in competitive markets, stock prices are determined by supply and
demand
However, in stock markets, supply and demand curves require careful
interpretations
Figure 1 presents a supply and demand diagram for shares of Fedex Corporation
On any given day, number of Fedex shares in existence is just the number that the
firm has issued previously
Just because 302 million shares of Fedex stock exist, that does not mean
that this is the number of shares that people will want to hold
People have different expectations about firms future profits
At any price other than $90 per share, number of shares people are
holding (on the supply curve) will differ from number they want to hold
(on the demand curve)
Only at equilibrium price of $90 people satisfied holding number of
shares they are actually holding
Stocks achieve their equilibrium prices almost instantly
$120
90
60
D
million 302
Number of Shares
$75
60
D1
million 298
D2
Number of Shares
60
45
D3
D1
Number of Shares
million 298
Stock
Market
Macroeconom
y
Changes in stock pricesthrough the wealth effectcause both equilibrium GDP and
price level to move in same direction
An increase in stock prices will raise equilibrium GDP and price level ,While a decrease
in stock prices will decrease both equilibrium GDP and price level
How important is wealth effect?
Economic research shows that marginal propensity to consume out of
wealth is between 0.03 and 0.05
Change in consumption spending for each one-dollar rise in
wealth
As a rule of thumb, a 100-point rise in DJIAwhich generally means a rise in
stock prices in generalcauses household wealth to rise by about $100 billion
Aggregate Expenditure
(b)
AS
Price
Level
45
Y1
Y2
Real GDP
Y1 Y3 Y2
Real GDP
Stock Market
Shock to
macroeconom
y
Macroeconomy
Shock to both
stock market
and
macroeconomy
A change might have most of its initial impact on the
overall economy, rather than the stock market
There might be a shock that initially affects stock market
Shock could have powerful, initial impacts on both stock
market and overall economy
A Shock to the Economy
Imagine that new legislation greatly increases government
purchases
A Shock To the Economy and the Stock Market: The High-Tech Boom
of the 1990s
1990sespecially second halfsaw dramatic rise in stock prices
Growth in real GDP averaged 4.2% annually from 19952000
In part, economic expansion and rise in stock prices were
reinforcing
Each contributed to the other
Internet had a direct impact on stock market through its effect
on expected future profits of U.S. firms
At the same time, technological revolution was having a huge
impact on overall economy
Faced with these demand shocks, Federal Reserve would
ordinarily have raised its interest rate target to prevent real GDP
from exceeding potential output
Technological changes of 1990s were an example of a shock to
both stock market and economy
Result was a market and an economy that were feeding on
each other, sending both to new performance heights
Was this a good thing?
Yes, and no
In spite of all this good news, there were dark clouds on horizon
The study of the Jordanian market is not purely statistical ,it is based on the market
variables differences between Jordan and the other countries , In this study, we access
to a collection of articles about the Jordanian economy in order to understand these
determinants that affect on the Jordanian economy .
Causal Relations among Stock Prices and Macroeconomic Variables in the
Small, Open Economy of Jordan : AKTHAM MAGHAYEREH
Assistant Professor .The Hashemite University, Zarqa, Jordan)
The investors perceptions of stock price movements in the ASE are highly sensitive
to the international environment especially to the economic and political
environments in the neighboring Arab countries.
Evaluating the Impact of Financial Development on Economic Growth in Jordan
(Idries Mohammed Al-Jarrah . Faculty of Business Administration :
The University of Jordan)
The main remark based on this analysis is that despite employing large number of
financial development indicators which proven to be high correlated with each other
and have witnessed significant growth over the study period, the impact of these
variables on economic growth is limited which necessitate further studies to detect
the main obstacles that deter the economic growth in Jordan
Stock markets ,Bank and economic growth (Jordan) (Eman F. Abu-Mhareb .
: The University of Jordan)
This study examines the causal relationship between stock market, banks and
economic growth in Jordan in order to establish whether financial development is
supply-leading or demand-following.
empirical results do not support the hypothesis that financial development lead to
changes in economic growth in Jordan. However, econometric analysis brings
evidence that the effect of the local macroeconomic variables (trade openness and
industrial production) on the economic growth is more important than that of financial
indicators.
References
JORDAN ECONOMIC MONITOR
Poverty Reduction and Economic Management Unit
MIDDLE EAST AND NORTH AFRICA REGION
The World Bank
Stock markets ,Bank and economic growth (Jordan) (Eman F. Abu-Mhareb .
: The University of Jordan)