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Markets and Trading: "Greed Is Good"-Gordon Gekko "You Can't Have Your Cake and Eat It Too." - Anonymous

The document provides information about markets and trading, including: - It discusses major stock exchanges like the NYSE, NASDAQ, LSE, and Tokyo Stock Exchange. - It explains what a stock index is and lists examples like the Dow Jones Industrial Average (DJIA) and S&P 500. - The DJIA, which tracks 30 large public US companies, is described in detail, including its history and composition.

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KaheendaRwiiko
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51 views28 pages

Markets and Trading: "Greed Is Good"-Gordon Gekko "You Can't Have Your Cake and Eat It Too." - Anonymous

The document provides information about markets and trading, including: - It discusses major stock exchanges like the NYSE, NASDAQ, LSE, and Tokyo Stock Exchange. - It explains what a stock index is and lists examples like the Dow Jones Industrial Average (DJIA) and S&P 500. - The DJIA, which tracks 30 large public US companies, is described in detail, including its history and composition.

Uploaded by

KaheendaRwiiko
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Markets and Trading

“Greed is good”- Gordon Gekko

“You can’t have your cake and eat it


too.” – anonymous*
Why have a market?
Tracking U.S.A Markets: 1926 - 2006
Some Major Stock Exchanges
 NYSE
 NASDAQ
 AMEX
 London Stock Exchange
 Tokyo Stock Exchange
 There are many others as well
. . . . . These are just SOME
of the major exchanges

 In Uganda . . . . . . . .

 Uganda Securities Exchange (USE)


But what about the Dow?
I mean, the Dow has been going
nuts… Up 500 points here, down 700
points there… isn’t it a market?

It is an INDEX
Dow Jones Industrial Average (DJIA)

On the USE . . . . . . . . . . .
USE All Share Index (UAS)
It’s a market weighted average
Indexes
• A stock index is simply the value of a bunch of
stocks that the index chooses to track.
• Indexes are often themed, such as
semiconductors, transportation, financial, or
industry.
• An index is evaluated over time, and special
accommodations must be made to account
for changes in the market.
Indexes
• So when you hear “The Dow was up 50
points”, you should know that the composite
value of the index known officially as the
“Dow Jones Industrial Average” was up 50
points.
• Other broad reaching indexes are the London
FTSE 100, the Nikkei, the German Dax, the
S&P 500, and the Wilshire 5000.
• Flaws????
DJIA
• The Dow Jones Industrial Average dates to the
late nineteenth century and was created by Charles
Dow, editor of the WSJ.
• Originally, it was a composite of 12 stocks, and it was
calculated by summing the prices and dividing by 12
to get the average.
• It now consists of 30 stocks, and the values are
weighted such that the stocks with more market
capitalization carry more weight on the index.
Dow Jones Industrials
• 3M • Johnson & Johnson
• American Express • J.P. Morgan Chase
• AT&T • McDonald's
• Boeing • Merck
• Caterpillar • Microsoft
• Chevron Corp. • Nike (9/13)
• Cisco • Pfizer
• Coca-cola • Procter & Gamble
• DuPont • Travelers
• Exxon-Mobil • United Health Care
• GE (from 1896) • United Technologies
• Goldman Sachs (9/13) • Verizon
• Home Depot • Visa (9/13)
• Intel • Wal-Mart
• IBM • Walt Disney
The Dynamic DOW

Recent Dow Component Changes


• BAC 2/2008 replaced Honeywell
• Chevron 2/2008 replaced Altria
• Cisco 6/2009 replaced Citi Group
• Kraft 9/2008 replaced AIG
• Travelers 6/2009 replaced GM
• UNH 9/2012 replaced Kraft
• GS 9/2013 replaced BAC
• Nike 9/2013 replaced HPQ
• Visa 9/2013 replaced AA
DJIA Notes of Interest
• Original value was 41
• Lowest value 28.48 in 1896
• Largest one day percentage loss (24.4%) in
1914, although Black Monday in 1987 was pretty
close (22.7%)
• Largest single day point drop was in September,
2008 (-777) but it translated to only about 7%
• To put things into perspective, 10/9/07, the DJIA
hit an all time high of 14,164; by 3/6/09 it had
dropped to 6,627; from 8/29/08 to 10/10/08 it
dropped 27% and today it is ~17,000
Sectors Indexes
• Similar companies are often lumped
together into sectors, and these sectors
often have indexes as well.
• Examples are the Biotechnology (BTK),
Semiconductor (SOX), DJ Utilites, and DJ
Transportation Indexes.
The Stock Market
• People are inherently bullish (optimistic)
Don’t Be Fooled
 The markets are for vendors as well
as buyers.
 Just because you like something
doesn’t mean it is undervalued.
 The same goes for sectors.
 Individual sectors can be
indicators, but often they
are just part of the composite
picture of the overall market
Investing
• Investing is when you put your money or assets
somewhere and hope to get a future return on it.
• Investing is usually longer term (from days to years
to decades).
• You can invest by either buying or selling.
• The market tends to go up over time.
• People like to think that we are making progress.
• The market (indexes) generally keeps ahead of
inflation.
• You have to be “in it to win it”
Short Selling
• Selling short is often regarded as “not so nice”
• In essence, you borrow shares to sell, and then
hope the price goes down so you can buy them
cheaper and return them to the owner.

• In the end . . . . . . ..
• It’s a Zero-sum situation.
• Investing has its share of winners, but it also
has its share of
Uganda: Capital Markets Authority Act
1996, Later . . . . CMA Act 2016

 U.S.A: Securities Rules and Regulations


 The Securities Act of 1933 was designed to ensure full and fair disclosure
of any stock offering to potential investors. It also includes a provision on
sales by key shareholders.
 The Securities Exchange Act of 1934 was designed to regulate
exchanges. The SEC was created out of this act. All domestic exchanges
are under SEC jurisdiction.
Investing…
So . . . . .
• You should know what a stock is already.
• So then here you are, ready to invest. How do
you do it?
STOCKS
MUTUAL
FUNDS

BONDS OPTIONS
FUTURES
MUTUAL FUNDS

For the investing neophyte, these pose the best


alternative if chosen wisely.
Why??
“Don’t put all your eggs in one basket”
That’s the philosophy of a mutual fund. Think
of your eggs going into many different baskets.
Mutual
MUTUALFunds
FUNDS

• A mutual fund takes your money and buys a


little of this and a little of that, thus limiting
your exposure to some degree.

GE GM DAL AA

DLTR IBM FSLR BTU

CNX TGT GOOG WMT

C JPM PFE BRCM

And then you get a fund manager who is hopefully experienced.


Where to get company / stock info?
WSJ
Buying Stocks Online
• Types of Stock Market Orders
– Market Order
– Limit Order
– Stop or Stop Loss Order
– Stop Limit Order
– Sell Short Order
– Buy to Cover Order

• Duration of Orders
– Day Order
– GTC (Good Til Cancel) Order
Class Trading Game

Entrepreneurs
Homework 1:
• In your inbox

• Hard copy in class

• Due: Friday, September 22nd, 2017

• Submission:
– In class – hard copy – by end of class period.

– Electronic – by end of class period.


Referencing . . . . . when
writing
1. Africa is a continent

2. The sun rises in the east

3. Ohm’s law:

4. “Engineering is the purposeful use of


science” - - - - - Steve Senturia

27
Plagiarism
You plagiarize if you don’t correctly
give credit to statements/work by
others.

e.g:
Circuit simulators have always remained
separate and distinct from the general-
purpose dynamical systems.

Instead:
 use quotations, even for paraphrased
statements.
 reference the authors – by name or
bibliography ordering.

“Circuit simulators have always remained


separate and distinct from the general-
purpose dynamical systems.” 28

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