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    1: Introduction To Financial Markets

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    1: Introduction To Financial Markets

    Uploaded by

    shiko tharwat
    56 views18 pages
    account

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    01Introx

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    Copyright:

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    Download as pptx, pdf, or txt
    56 views18 pages

    1: Introduction To Financial Markets

    Uploaded by

    shiko tharwat
    account

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    You are on page 1of 18

    I: Introduction

    1: Introduction to Financial Markets


    Dow Jones Industrial Average

    Chapter 1: Introduction to Financial Markets © Oltheten & Waspi 2012


    Circular Flow
    FINANCIAL MARKETS
    CAPITAL
    FACTORS OF
    LABOR PRODUCTION
    LABOR MARKETS

    HOUSEHOLDS GOVERNMENT FIRMS

    CONSUMPTION PRODUCTION
    GOODS MARKETS

    Chapter 1: Introduction to Financial Markets © Oltheten & Waspi 2012


    Markets
     Exist to bring buyers and sellers together

    Chapter 1: Introduction to Financial Markets © Oltheten & Waspi 2012


    Markets
     Labor markets

    .February 1 & 2
    2pm – 6pm
    ARC

    Chapter 1: Introduction to Financial Markets © Oltheten & Waspi 2012


    Markets
     Primary market
    FINANCIAL MARKETS

     Secondary market

    FINANCIAL MARKETS

    Chapter 1: Introduction to Financial Markets © Oltheten & Waspi 2012


    Circular Flow

    Chapter 1: Introduction to Financial Markets © Oltheten & Waspi 2012


    Financial Markets
     Facilitate optimal allocation of
     .
     .
     through .

    Chapter 1: Introduction to Financial Markets © Oltheten & Waspi 2012


    Returns Mechanism
     Normal Return
     .

     Abnormal Return
     .
     .

    Chapter 1: Introduction to Financial Markets © Oltheten & Waspi 2012


    The
    Returns Mechanism beginning
    of a
    bubble

     Normal Return  Abnormal Return

    Chapter 1: Introduction to Financial Markets © Oltheten & Waspi 2012


    Efficient Markets Hypothesis
     Weak Form
     .
     Semistrong Form
     .
     Strong Form
     .

    Chapter 1: Introduction to Financial Markets © Oltheten & Waspi 2012


    Technical Analysis
     Double Bottom (shaped like a W)
     [A] Breakout #1
     [B] Breakout #2
     [C] New Trend

    http://business.illinois.edu/finance_dev/Lesson21.asp

    Chapter 1: Introduction to Financial Markets © Oltheten & Waspi 2012


    Fundamental Analysis
     Earnings Per Share (EPS)
    Net Income
    EPS 
    Shares Outstanding

     Price/Earnings Ratio (P/E)


    Stock Price
    P/E 
    EPS

    Chapter 1: Introduction to Financial Markets © Oltheten & Waspi 2012


    Fundamental Analysis
    availability of
     Current Ratio working capital
    Total Current Assets
    CR 
    Total Current Liabilities

     Quick Ratio liquidity

    Cash & Marketable Securities  Accounts Receivable


    QR 
    Total Current Liabilities

    Chapter 1: Introduction to Financial Markets © Oltheten & Waspi 2012


    Fundamental Analysis
     Return on Assets (RoA) efficient use of
    assets
    Net Income
    RoA 
    Total Assets

     Return on Equity (RoE)


    profitability
    Net Income
    RoE 
    Shareholders Equity efficient use of
    factors of
     Gross Profit Margin on Sales production

    Sales - Cost of Goods Sold


    MarginGross 
    Sales
    Chapter 1: Introduction to Financial Markets © Oltheten & Waspi 2012
    Practice Questions

    Chapter 1: Introduction to Financial Markets © Oltheten & Waspi 2012


    Q&P 1-1:
     I use my computer and Internet link to chart the movement of all 30 Dow
    Jones Industrial stocks. I buy and sell according to my analysis of these price
    movements. If I can generate consistent abnormal returns in this manner then
    this is a failure of
     Charles is a member of the Board of Directors of the Royal Bank. If he can
    generate consistent abnormal returns in trading Royal Bank shares then this is
    a failure of
     Varya checks out all the Value Line publications and buys everything that
    Value Line recommends. If she can generate consistent abnormal returns then
    this is a failure of
     I watch Wall Street Week every week. Then when it's over I throw a dart at
    the Wall Street Journal. I buy whatever the dart hits. If I can generate
    consistent abnormal returns in this manner then this is a failure of
     John Q. Investor analyses the quarterly earnings statements of some fifty
    obscure small-cap stocks. He then buys according to the earnings pattern
    disclosed. If he can generate consistent abnormal returns in this manner then
    this is a failure of
    Chapter 1: Introduction to Financial Markets © Oltheten & Waspi 2012
    1: Financial Markets in the Economy

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