EECS 1710 Lecture 36: EECS 1710 Lecture 36 Notes
24 Jun 2018
School
Course
Professor
EECS 1710 Lecture 36 Notes
Introduction
Comparing the Size of Stock Markets
There are several reasons for such a strategy.
First, these investors may expect favorable economic conditions in a particular country
and therefore invest in stocks of the firms in that country.
Second, investors may wish to acquire stocks denominated in currencies that they
expect to strengthen over time
Since that would enhance the return on their investment
Third, some investors invest in stocks of other countries as a means of diversifying their
portfolio.
Thus, their investment is less sensitive to possible adverse stock market conditions in
their home country.
More details about investing in international stock markets are provided in the appendix
Exhibit 3.5 gives a summary of the major stock markets, although there are numerous
other exchanges.
Some foreign stock markets are much smaller than the U.S. markets because their firms
have traditionally relied more on debt financing than on equity financing.
However, recent trends indicate that firms outside the United States now issue stock
more frequently, which has led to the growth of non-U.S. stock markets.
The percentage of individual versus institutional ownership of shares varies across stock
markets.
Outside the United States, financial institutions (and other firms) own a large proportion
of the shares whereas individual investors own a relatively small proportion.
Some related generalization (that applies to stock markets *in* the United States) goes
here.
Large MNCs have begun to float new stock issues simultaneously in various countries.
Document Summary
There are several reasons for such a strategy. First, these investors may expect favorable economic conditions in a particular country and therefore invest in stocks of the firms in that country. Outside the united states, financial institutions (and other firms) own a large proportion of the shares whereas individual investors own a relatively small proportion. Some related generalization (that applies to stock markets *in* the united states) goes here. Large mncs have begun to float new stock issues simultaneously in various countries. In this case, investment banks underwrite stocks through one or more syndicates across countries. These investors may expect favorable economic conditions in a particular country and therefore invest in stocks of the firms in that country. Second, investors may wish to acquire stocks denominated in currencies that they expect to strengthen over time. Since that would enhance the return on their investment. Third, some investors invest in stocks of other countries as a means of diversifying their portfolio.
