Economics: The Stock Market
Christian principles that should be considered when studying the stock market...
1. Stewardship (Prov. 13:11 & Matt. 25:27) be a good steward of your money 2. Covetousness (Deut. 5:21 & I Tim. 6:9) Success is not defined by material things 3. Love for God (Matt. 6:24, 33 & Matt. 22:37) Put God first. You can't serve 2 masters. 4. Love for Others (Matt. 22:39) Love your neighbor as yourself. DOn't take advantage of them.
When and why was the SEC founded?
1934; to ensure that corporations provide accurate & current information to the public about their financial situation & their business dealings
The DJIA is an index of...
30 major U.S. producers of goods & services
Stock Portfolio
A collection of stocks from different individual corporations
Standard & Poor's 500 (S&P 500)
A commonly reported investment index that includes 500 stocks & is intended to give an even broader perspective on business in the U.S. than the DJIA
Dividends
A distribution of a portion of the corporation's profits
Bear Market
A falling stock market in which investors are selling stock
Securities & Exchange (SEC)
A governmental agency funded to ensure that coroporations provide accurate & current information to the public about their financial situations & their business dealings. Founded in 1934, a safeguard
Mutual Funds
A group of stocks purchased by individuals & managed by a professional. Privately managed stock portfolios
Stock Exchanges
A location at which stock is traded
Stockbroker
A person who generally works for a brokerage company & who specializes in buying & selling stocks on behalf of his clients
Bull Market
A rising stock market in which investors are buying stock
Portfolio
A set of investment assets owned by an individual
Speculation
Actively buying & selling stocks for the purpose of taking advantage of short-term price changes. Risky, close to gambling
Tape
An electronic message board used to indicate stock prices & transactions
Speculative Bubble
Excessive rising stock prices due to expected rises in prices. When the stock value exceeds the company's worth.
What is the most prevalent type of stock that corporations offer?
Common stock
A dividend payment is based on the...
Company's profits
Which is the most well-known stock index?
DJIA
What is the most well-known stock index in the U.S., & who developed it? What well-known business publication did they start?
Dow Jones Industrial Average (DJIA), Charles Dow & Edward Jones, The Wall Street Journal
The organization that helps a business issue stock to the public for the first time is...
Investment bank
What is the danger of speculation?
It is a high risk to lose investments
Common Stock
Most prevalent type of stock that companies offer & represent true ownership of the firm
What is the largest stock exchange in the U.S. that has no trading floor?
NASDAQ
Which stock exchange is entirely electronic with no face-to-face trading?
NASDAQ
The most respected stock exchange in the world is the..
NYSE
The index that includes all the stocks on the NYSE is the
NYSE Composite Index
Preferred Stock
Not true ownership of a corporation. Stock that carries less risk of loss
What is the most well-known stock exchange in the world, & what accounts for its importance
New York Stock Exchange (NYSE), Its history, location in the financial center of N.Y., & listings, which include many of the most economically significant companies in the world
Businesses sell stock to the public primarily to...
Obtain additional financial capital
List 3 reasons that stock markets are important to the economy.
Provide a venue for the sale of stock, provide opportunities for individuals to invest, & provide information to corporate leaders, economic analysts, & governmental policy makers (valuable info on a nation's economy)
What are the two principle reasons that individuals purchase shares of stocks?
Retirement & dividends
Actively buying & selling stocks for the purpose of profiting from short-term changes in their prices is called...
Specualtion
What term describes a group of stocks that are listed together with their prices combined & reported together?
Stock Index
Floor Traders
Stock traders physically present on the trading floor to execute requested trades
What is a person called who works for an investment firm & specializes in the buying & selling of stocks? What does he receive that can be either a flat rate or a percentage of the value of the stock trade?
Stockbroker, commission
NASDAQ
The National Association of Securities Dealers Automated Quotations, the largest exchange that does not have a trading floor
The price of a stock tends to reflect information and expectations about...
The company's profitability
Commission
The fee paid for a stockbroker's services
Initial Public Offering (IPO)
The initial sale of a company's stock through an investment bank
American Stock Exchange (Amex)
The lesser known but still reputable American stock market
New York Stock Exchange (NYSE)
The most well-known & reputable stock market in the world. It is the center of America's financial center
Dow Jones Industrial Average (DJIA)
The most well-known American stock index
What does over-the-counter trading lack that other stock exchanges have?
There's no physical location where trading takes place
Owning shares of stock not only makes a person a partial owner of a corporation, but also gives that person what other opportunity?
To cast votes on business decisions & to earn dividends
What is the SEC's principal function?
To supervise the industries
Why do corporations sell stock?
To take advantage of the limited liability & legal status they gain by organizing their business as a corporation & to raise money for business purposes, expansion, & research
Stock
When you own shares of a corporation