BUS 312 Lecture Notes - Lecture 6: Tokyo Stock Exchange, Common Stock, Market Capitalization

• School: Simon Fraser University
• Department: Business Administration
• Course: BUS 312
• Professor: Martin Thorsten

Document Summary

Primary and secondary markets: primary markets: sale of new shares to raise new capital, secondary markets: trading of secondhand shares (no new capital raised, stock markets can be organized in different ways: exchanges (auction markets) - nyse, Tokyo stock exchange, london stock exchange - auctioneer matches buyers and sellers. Otc (dealer markets) - trades take place between dealers and investors. How to value a stock: by comparison with (comparable!) firms, by applying the present value operator to all future dividends. Valuation by comparables: our npv formula applies to the valuation of stocks, since shareholders receive dividends, an obvious approach to value a stock is simply. The return of a stock between two periods can be broken into two parts: dividend yield + Expected return = r = div1 p0 + p1 - p0 p0. Dividend discount model - computation of today"s stock price which states that share value equals the present value of all expected future dividends.