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Stocks. Unit Five, Lesson Two Cook Economics. Stocks. Stocks—ownership in a corporation There are two types of stock: Common stock—full voting interest, vote to select Board of Directors; majority of common stockholders controls the corporation
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Stocks Unit Five, Lesson Two Cook Economics
Stocks • Stocks—ownership in a corporation • There are two types of stock: • Common stock—full voting interest, vote to select Board of Directors; majority of common stockholders controls the corporation • Preferred stock—preference in bankruptcy and dividends, no voting power
Stocks • Publicly traded stocks—these are the ones you see on the big stock markets—anyone can buy into the company; it is open to the public—all publicly traded stocks are given symbols to shorten their name on the tickers • We are mostly interested in public stocks
How to read stocks/stock definitions • PE or P/E or Price Earnings Ratio—the ratio per share of stock divided by its earnings per share in the previous year • Round Lot—100 shares of stock—stocks are usually traded in round lots; often sales of stocks are reported this way, so a listing of sales of 37900 means 3,790,000 shares were traded
How to read stocks/stock definitions • Stock prices—price of a share of on the stock exchanges and NASDAQ are reported as: • LAST-price agreed on for last trade • HIGH—the most anyone paid that day • LOW—the least anyone paid that day • CLOSE—the last trade of the day • CHANGE—the difference between the previous day’s close and the current price
Stock Definitions • Short sale—selling a security (like stock) that the seller does not own but is eventually committed to repurchasing eventually. It is used to capitalize on an expected decline in the security’s price
Stock Definitions • Cover—buying stock to repay shares that were previously sold short
Measures of Stock Performance • Dow-Jones Industrial Average—most popular and widely publicized measure of stock market performance on the NYSE—gives percentage changes of 30 active and popular stocks • Standard and Poor’s 500—gives price changes of 500 representative stocks as an indicator of overall market performance
Measures of Stock Performance • Bull Market—a “strong” market with prices moving up (a bull strikes by driving its horns up) • Bear Market—a “mean” market with the prices of equities moving sharply down (a bear strikes by swinging its paw down)
Securities Exchange • Securities exchanges—places where buyers and sellers meet to trade securities • New York Stock Exchange (NYSE)—oldest and most prestigious of the organized stock exchanges in the U.S.; located on Wall Street in NYC; 3,000 companies listed to trade
Securities Exchange • The American Stock Exchange—AMEX—also located in NYC; lists 1,000 stocks • Regional Stock Exchanges—originally listed corporations that were either too small or too new to be listed; meets the needs of smaller and middle-sized corporations in their regions
Securities Exchanges • Global Stock Exchanges—allows major stocks to be traded around the clock, all over the world-London, Hong Kong, Tokyo, etc… • O verthe Counter Market—an electronic marketplace for securities that are not traded on an organized exchange (NASDAQ is the listing that provides information on stocks that this group trades)
