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14 Cards in this Set
- Front
- Back
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Types of us exhcange membership
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Specialist - Controls limit orders, post bid/ask prices, trades on own account
Commission broker - executes customer trades for brokerage firm Floor broker - freelance brokers for other commission brokers Regeristered traders - trade for their own account |
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Limit order
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orders to buy/sell away from current price. Limit sell order is abover current price. Limit buy order is below current price. They have specific time period
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Stop loss order
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Used to prevent loss or protect profit. (ex. stock @ 40, stop loss order at 35. If stock falls to 35, it will automatically be sold.)
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Trigger price (margin purchase)
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= Price at time 0 X [(1-initial margin)/(1-maintenance margin)]
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Trigger price (short sale)
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= Price at time 0 X [(1+initial margin)/(1+maintenance margin)]
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Price Weighted series
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current stock prices divided # of stocks. Denominator is adjusted for stock splits. High priced stocks have greater influence on index value than lower priced stocks. Assumes same number of shares purchased of each stock
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Price weighted series examples
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Dow Jones industrial and Nikkei
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Price weighted bias
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Fastest growing stocks tend to split. Stock split lowers stock price and therefore lessens influence on index
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Market value weighted series formula
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=[(price today)(number shares outstanding)/(price in base year)(number shares outstanding)] X base year index value
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Market value weighted series and bias
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Value weighted index assumes you make proportionate market value investment in each company in the index. THe major problem is that value-wieghted index places greater impact on firms with greater market capitalization
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Market value weighted series (examples)
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S&P 500
NYSE indices (covers all stocks on NYSE and separates them into different mkt segments ie transportation, financials etc) NASDAQ series AMEX MSCI indices |
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Unweighted series
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Places equal weight on the returns of all stocks in index. Essentially it is just the arithmatic or geometric mean of the returns of each stock. Total is then multiplied by base value
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Unweighted Bias
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If geometric mean is used it places downward bias on index as geometric mean is always lower than the arithmatic mean.
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Unweighted examples
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Value line composite average
Financial times ordinary share index |
