STOCK MARKET

by DollarBillionaire™

High-Performance Individuals understand The Stock Market and the various institutions that exist to support investing in the stock market.  Here we define what the Stock Market is and give a broad overview of the surrounding landscape including the DJIA and the FTSE 100.

STOCK MARKET

In this Teaching Document, you will find the DollarBillionaire ™ Guidance Notes on The Stock Market.

Written by Barron Hall. Revised and Updated Thursday 08 August 2019.

Table of Contents: [toc]

STOCK MARKET DEFINITION

Stock Market

Stock Market - Definition

The Stock Market is a place where Buyers (Investors) and Sellers of securities can find each other, potentially resulting in a sale and purchase of securities.  Shares of publicly listed companies are traded on the Stock Market, normally called a Stock ExchangeThe Primary Stock Market is where firms can raise capital by selling shares to investors in an Initial Public Offering (IPO).  The Secondary Stock Market is where already listed shares are traded, investor to investor.  A Stock Market is also called an Equity Market or Share Market

What is the “Stock Market”

A stock market is simply a marketplace like any other, in the sense that it is a place where buyers and sellers can get together and arrange a trade.   The goods that are traded are securities.  Securities that are traded include stocks and shares, bonds, options, futures, and commodities.  This market is different however, in that the buyers and sellers do not meet physically.  The investors generally make their trades electronically by using a computer.  This instructs a broker to complete the trade at the stock exchange.

The Primary and Secondary Stock markets

The Primary Stock Market is the place where corporations can raise capital by going public through an IPO, an Initial Public Offering.  This enables the growing business to raise more capital to reward the entrepreneurs that created the business and to grow further.  Once listed, this company and other listed companies have their shares and other securities traded on The Secondary Stock Market.  The Primary Stock Market involves a deal between a company and investors.  The Secondary Stock market involves deals between investors and other investors, with the company itself not being involved, apart from the change of ownership of its shares.

Stock Market Times

Stock Markets are not open all day.  They have set opening and closing times and often are closed on holidays.  Day Traders especially need to take note of these times and plan their working hours and trades accordingly.  An excellent resource to help here is StockMarketClock which lists much useful information about the Stock Exchanges of the World.

Top 20 Stock Markets of the World

(1) The USA, NEW YORK.  NYSE: The New York Stock Exchange.

(2) The USA, NEW YORK.  NASDAQ: NASDAQ Stock exchange

(3) JAPAN, TOKYO.  JPX: The Tokyo Stock Exchange

(4) CHINA, SHANGHAI.  SSE: Shanghai Stock Exchange

(5) HONG KONG, HONG KONG.  HKEX: The Stock Exchange of Hong Kong

(6) NETHERLANDS, AMSTERDAM.  Euronext N.V.

(7) ENGLAND, LONDON.  LSE: London Stock Exchange

(8) CHINA, SHENZHEN.  SZSE: Shenzhen Stock Exchange

(9) CANADA, TORONTO.  TSX: Toronto Stock Exchange

(10) INDIA, MUMBAI.  BSE: The Bombay Stock Exchange

(11) INDIA, MUMBAI.  NSE: National Stock Exchange of India

(12) GERMANY, FRANKFURT.  FSX: Deutsche Börse

(13) SWITZERLAND, ZURICH.  SIX: Swiss Exchange

(14) SOUTH KOREA, SEOUL.  KRX: Korea Exchange

(15) AUSTRALIA, SYDNEY.  ASX: Australian Securities Exchange

(16) TAIWAN, TAIPEI.  TWSE: Taiwan Stock Exchange

(17) BRAZIL, SAO PAULO.  B3

(18) SOUTH AFRICA, JOHANNESBURG.  JSE: Johannesburg Stock Exchange Limited

(19) SPAIN, MADRID.  BMEX: Bolsas y Mercados Españoles

(20) SINGAPORE, SINGAPORE.  SGX: Singapore Exchange

Stock Market Index

A stock market index is roughly speaking, the weighted average price of a pre-defined set of stocks or other securities.  These stocks are chosen to represent a particular market overall.  Indices are used to see trends in the underlying marketplace.  They also allow an investor to see how a particular stock is performing compared to the market overall.  There can be various indices for various portions of the market, like technology, oil and so on. 

The most common indices used in the financial world of stock trading

(1) Dow Jones Industrial Average (DJIA),

(2) the Financial Times Stock Exchange 100 Index (FTSE 100),

(3) the Dow Futures (Dow Jones Futures)(DJIA Futures),

(4) the S&P/ASX 200 index (ASX 200)

(5) the TSX Index.  The S&P/TSX Composite Index (TSX Today)(TSC Chart),

(6) the FTSE 250,

(7) the NASDAQ Composite (NASDAQ Today),

(8) the Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX),

(9) Shanghai Index (Shanghai Composite),

10) Nikkei 225, and

(11) the DAX Index.

(12) the US Aggregate Bond Index

 

Dow Jones (DJIA)

What is the Dow Jones Index?

The Dow Jones Industrial Average Index (DJIA) is an index of company prices based on 30 large, publicly owned businesses based in the United States.  They are all listed on the New York Stock Exchange (NYSE) or on NASDAQ.  They were all chosen to represent a broad spectrum of the US economy.  The constituent companies have changed over time for various reasons, with General Electric being the longest serving member of the Dow.  These companies that are in the Dow are also present in the S&P 500 Index.

What does Dow Jones Stand for?

The Dow Jones Index was created by Charles Dow in 1885 working with the statistician Edward Jones.  So the name Dow Jones is shortened from the names Charles Dow and Edward Jones

What companies are on the Dow Jones?

The list of companies that comprise the DJIA is as follows: (sorted by oldest member to the newest) ExxonMobil, Procter and Gamble, United Technologies, 3M, IBM, Merck and Company, American Express, McDonald’s, Boeing, Coco-Cola, Caterpillar, JPMorgan Chase, Walt Disney, Johnson and Johnson, Walmart, The Home Depot, Intel, Microsoft, Pfizer, Verizon, Chevron, Cisco Systems, Travelers, UnitedHealth Group, Goldman Sachs, Nike, Visa, Apple, Walgreens Boots Alliance, and Dow Inc.  ExxonMobil was added to the DJIA in 1928, originally as Standard Oil, and Dow Inc was added to the DJIA in 2019.

What Industries are on the Dow Jones?

Industries represented are Aerospace and defense (1), Apparel (1), Broadcasting and Entertainment (1), Chemical Industry (1), Conglomerate (2),Construction and Mining Equipment (1),Consumer Goods (1), Financial Services (5), Food (2), Information Technologies (5), Managed Health Care (1) , Oil and Gas (2), Pharmaceuticals (3), Retail (3), Telecommunications (1).

Despite the fact that the name of the index contains the word “industrial”, it is not a true industrial index, since quite a few of the constituent companies are not industrial companies.

Why is Dow Jones called “Dow Jones?”

The Dow Jones Index was created by Charles Dow in 1885.  The “Jones” part of the name comes from the statistician Edward Jones, who worked with Charles Dow to create the index.   Their website can be found here, and the Dow Jones index is owned by S&P Dow Jones Indices, which in turn is mainly owned by S&P Global.

The Dow Jones Trading Symbol is DJI.  This is the unique set of letters assigned to the Dow.

How is the Dow Jones Calculated?

The Dow Jones is based on 30 large, publicly owned businesses based in the United States that are all listed on the New York Stock Exchange (NYSE) or on NASDAQ.  They were all chosen to represent a broad spectrum of the US economy.  The Dow Jones Index is a Price Weighted Index.   This means that stocks with higher prices carry more mathematical weight in the makeup of the index number than stocks with lower prices per share.  This is often not ideal.  An insignificant company with a high price per share should not carry so much weight compared to a massive firm with many many shares at a lower share price.

Simply put, Market Capitalization = no of shares x price per share.  Consider company A with 1000 share at $600 each would have a market cap of $600 000.  Company B with 10 00 000 shares of $60 each would have a market cap of $60 000 000.  The Dow Jones Index would give the first company a higher weight in the makeup of the index because it uses price weighting.  The reader can see the obvious problem here, namely company A is much smaller than company B, and yet company A gets the higher weighting.  That said, the index remains a price-weighted index and the user needs to be aware of this.

Why is the Dow Jones Index important?

The DJIA is a very old and established index.  It goes all the way back to 1885 and has been kept alive up to today.  Investors are used to tracking this index, even tough it is “Price Weighted” and is perhaps inferior to some other indices like the S&P/ASX 200 index (ASX 200).

What is the difference between the Dow and the S&P 500?

The Dow Jones and the S&P 500 differ in the number of firms in the indexes, the actual firms in the indexes, and also the manner of calculation of the indexes.  The Dow Jones index is calculated from 30 firms in the USA.  The S&P 500 is calculated from 500 firms.  So the S&P 500 will be more representative of the market than the Dow will be.  The Dow Jones uses a “Price Weighted” system of index calculation, whereas the S&P 500 uses a “Market Capital Weighted” system of index calculation.  So the S&P 500 is better designed from a mathematical point of view and will reflect the movements in the underlying market more acurately.

Can you buy Dow Jones “Stock”?

No, you cannot buy Dow Jones “stock”.  A person cannot invest in the index directly, since the DJIA is only an index, a series of numbers tied to a time-line.  The DJIA is not a security or a share or a stock.  Exposure to the DJIA can however be obtained by the use of Exchange Traded Funds (ETFs) as well as Derivatives through Options Contracts and Futures Contracts

 

9 120 000 Dow Jones

7 400 000 Index

4 090 000 djia

 3 300 000 dax

2 700 000 dow

2 240 000 S&P 500

 1 830 000 ftse 100

 1 000 000 dow jones index

1 000 000 dow futures

1 000 000 dow jones live

1 000 000 hang seng

550 000 nasdaq index

550 000 hang seng index

450 000 ftse

368 000 dow jones futures

360 000 s and p 500

368 000 asx 200

368 000 ftse100

368 000 vix

301 000 cpi

301 000 s&p 500 index

301 000 dax index

280 000 dow jones today

246 000 all ords

246 000 tsx index

246 000 ftse 250

246 000 nasdaq 100

246 000 dow jones chart

201 000 nikkei 225

201 000 dow today

201 000 sp500

201 000 nasdaq composite

135 000 ftse 100 index

90 000 ftse index

60 500 hmmj

60 500 all ordinaries

49 500 asx ords

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3 350 000 Dow Jones Industrial Average (DJIA)

3 350 000 DJIA

2 240 000 dow

1 830 000 Stock market

1 830 000 Dow Jones Today (DJIA Today)

1 830 000 Stock Market (Share Market)

1 500 000 The Financial Times Stock Exchange 100 Index (FTSE 100)

823 000 Dow Futures (Dow Jones Futures)(DJIA Futures)

550 000 DOW Jones Index

550 000 Dow Jones Index

450 000 Stock Futures

368 000 The S&P/ASX 200 index (ASX 200)

368 000 FTSE 100

368 000 Stock Market Today

301 000 FTSE

246 000 TSX Today

246 000 Dow Jones Live

246 000 Dow Jones Industrial

246 000 Stock Market News

246 000 TSX Index.  The S&P/TSX Composite Index (TSX Today)(TSC Chart)

201 000 CNBC Premarket

201 000 Dow Jones Chart

201 000 FTSE 250

201 000 dow jones futures

201 000 DJIA Today

201 000 Dow Today

165 000 Dow Jones Average

165 000 Premarket

135 000 Dow Jones Stock

110 000 NASDAQ Composite (NASDAQ Today)

110 000 CNN Premarket

110 000 Stock Market Futures

110 000 Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX)

100 000 FTSE 100 Index

70 000 Shanghai Index (Shanghai Composite)

60 000 Nikkei 225

49 000 NASDAQ 100

40 500 S&P 500 Today

40 000 DAX Index

33 100 Stock Market Graph

27 100 Stock Exchange

14800 US Stock Market News

14 800 Nasdaq Stock Price

14 800 Stock Market Chart

2 900 Stock Market Trading

2 900 US Stock Market Crash

2 900 Stock Market Dynamics

2400 Marketwatch Futures

1 900 Watchlist Bloomberg

1600 Financial Index

1 000 Stock Market Meaning

880 Debt Market

590 Stock Exchange Trading

590 Corporate Stock

90 Functions of the Stock Exchange

30 The Role of the Stock Market

Top Merchant banks include JPMorgan Chase, Bank of America Merrill Lynch, Goldman Sachs, Morgan Stanley, and Citibank.

Relative Sizes of the Worlds Top 20 Stock Exchanges by Market Capitalization in 2019

The length of the blue bars shows the relative sizes of the various world Stock Exchanges compared to the size of the New York Stock Exchange (NYSE).  The percentage number shown lets you know how large that particular stock exchange is compared to the NYSE.  It is interesting to see that the NYSE is more than double the size of any other stock exchange in the world.  The NYSE is also more than four times the size of any other stock exchange, apart from the NASDAQ, where it is about double the size of the NASDAQ.  The NYSE at about (USD) $25 Trillion is about 28% of the size of all of the stock exchanges in the planet put together, which currently total about (USD) $90 Trillion.

  • NYSE USA, New York ⬇︎ 100% 100%
  • NASDAQ-US USA, New York ⬇︎ 48.1% 48.1%
  • JPX Japan, Tokyo ⬇︎ 23.2% 23.2%
  • SSE China, Shanghai ⬇︎ 19.7% 19.7%
  • Euronext Netherlands, Amsterdam ⬇︎ 18.2% 18.2%
  • HKEX Hong Kong, Hong Kong ⬇︎ 17.3% 17.3%
  • LSE England, London ⬇︎ 16.2% 16.2%
  • SZSE China, Shenzhen ⬇︎ 12.5% 12.5%
  • TMX Canada, Toronto ⬇︎ 9.5% 9.5%
  • BSE India, Mumbai ⬇︎ 9.1% 9.1%
  • NSE India, Mumbai ⬇︎ 9.0% 9.0%
  • FSX Germany, Frankfurt ⬇︎ 8.0% 8.0%
  • SIX Switzerland, Zurich ⬇︎ 7.1% 7.1%
  • ASX Australia, Sydney ⬇︎ 6.0% 6.0%
  • KRX South Korea, Seoul ⬇︎ 5.9% 5.9%
  • TWSE Taiwan, Taipei ⬇︎ 4.3% 4.3%
  • B3 Brazil, São Paulo ⬇︎ 4.3% 4.3%
  • JSE South Africa, Johannesburg ⬇︎ 4.0% 4.0%
  • BME Spain, Madrid ⬇︎ 3.2% 3.2%
  • SGX Singapore, Singapore ⬇︎ 2.9% 2.9%

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Graphic: The Stock Market

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