FNCE10002 Chapter Notes - Chapter 1: Primary Market, Transaction Cost, Bid Price
30 Jun 2020
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Value of shares in private companies are difficult to determine. Public companies" shares are traded on stock markets/exchanges. Stock markets provide liquidity and determine market price of shares. Liquid investment = one that is possible to sell quickly and easily for a price close to price it can be bought at within a short time period. Provides flexibility regarding timing and duration of investments. Research and trading of participants provide feedback to managers regarding investors" views of their decisions. Primary market = corporation issues news shares of stock and sells to investors by itself. Secondary market = shares trade between investors without involvement of corporation. Posted bid price (buying price) and ask price (selling price) Made the trade even when there was no customer on the other side. Market makers make money because ask price > bid price (bid-ask spread) Limit order = order to buy or sell at a set amount at a fixed price.
