Volatility of the Stock Market Essay

4002 Words Jul 8th, 2014 17 Pages
Moniruzzaman bhuiyan ID: Co265MHMH0813

Submitted to S.A. Palan

Financial Markets and Investment Analysis
PD Limited

Financial Markets and Investment Analysis

Task 1 question answer

Introduction
For any economy stock market is the heart, the entire economy depends on this market. Normally what do we understand by market? Market is a place where some people buy and some people sell their goods, same thing happen in stock market. In any country or economy there is few people who have innovative idea and
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Tax incentives, such as relief for saving through pension vehicles, also encourage investment to be through institutions. (Fell, 2000; P-89)
There would certainly appear to be some restlessness about it, even in government circles. In the UK privatisations often included inducements aimed especially at individuals to encourage them to apply for shares. The total number of individual shareholders has increased in recent years, but still the proportion of shares in individual hands has fallen. One potential problem with most share being in institutional hands is that institutions are thought to be more conscious of performance than individuals, which might lead to short-termism, discussed below. The fact that so many shares are controlled by so few people, all of whom may be conscious of each other’s views and actions, might also make the market more volatile. There is a concern that investment managers will tend to think and act in the same way; reinforcing bull or bear markets, whereas individuals will tend to have a greater diversity of views. Institutional shareholding may also divorce the ‘man in the street’ from the workings of the financial markets, and this might lead to an ignorance of and antipathy towards the markets and their influence on the economy as a whole. (Fell, 2000; P-89)
In favour of institutional holdings of shares, however, are the arguments that larger shareholder can exert more influence on potentially wayward boards

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