1. WHAT IS THE STOCK MARKET?

2. STOCK EXCHANGE  The Stock Market is often referred to as an exchange  Why? To exchange means to trade  An stock exchange is a highly organized market where stocks and other forms of exchanges are sold and bought

3. HISTORY  First similarities to the investment process occurred in the 1600’s in the East Indies  In New York City, stock brokers would make trades on the streets

4. NEW YORK STOCK EXCHANGE  In 1792, 24 stockbrokers signed the Buttonwood Agreement that started the New York Stock Exchange  This group of stock brokers was very exclusive  They moved their operation indoors, to a coffee shop

5. NEW YORK STOCK EXCHANGE  The stock brokers that were not a part of the group of 24 continued to make trades in the street  By 1901, the NYSE had grown to become a financial powerhouse

6. AMERICAN STOCK EXCHANGE  Made up of the group of investors that was not included in the group of 24 that created the NYSE  Known as “curbstone brokers” because they traded outdoors, regardless of the weather  Anyone could be a part of this group  Took chances on smaller companies, emerging companies and new investment opportunities

7. MERGERS  Merger-two companies that are combined together to create one  In 2007, Euronext, the European stock exchange merged with NYSE  In 2008, the American Stock Exchange also merged with NYSE/EURONEXT  Global marketplace-bringing together of world markets in one exchange

8. NASDAQ  National Association of Securities Dealers Automated Quotations  Largest electronic screen based trading market in the U.S.  Created in 1971  World’s first ever completely electronic exchange

9. NASDAQ VS. NYSE NASDAQNYSE  Trades occur electronically, on a telecommunications network  Dealer’s market  Trades occur physically on the trading floor  Auction market

10. MARKET PERCEPTIONS  The NASDAQ and the NYSE are viewed differently

11. PERCEPTION OF THE NASDAQ  Technology, internet and electronics  Stocks considered to be uncertain and risky  Lists companies that are growth oriented and expected to grow at an above average rate

12. COMPANIES LISTED ON THE NASDAQ  Facebook  Microsoft  Harley Davidson  Weight Watchers  Sony  Papa John’s

13. PERCEPTION OF THE NYSE  Companies are more well-established  Blue chip companies-companies with a national reputation for quality, reliability and the ability to operate profitably in good times and bad  The stock of blue chip companies is known as “blue chip stock”

14. BLUE CHIP STOCK  Why is it called blue chip stock?  In the game of poker, which is a game of chance and risk, the blue chip has the highest value  Hence, the name “blue chip stock”-stock in companies with high value

15. BLUE CHIP STOCKS  As a result of their high level of financial strength and market reputation, blue-chip stocks traditionally carry substantially less risk than other stocks. They are generally regarded as safe, sound investments.

16. EXAMPLES  General Electric  AT&T  Proctor & Gamble  Chevron  Wal-Mart  Boeing

17. LISTING A COMPANY  Deciding which exchange to list your company on is important  It usually comes down to cost

18. COST NYSENASDAQ  Entry Fee: $250,000 (One time fee)  Yearly fee: based on the number of shares, maximum of $500,000  Entry fee: $50,000-$75,000 (one time fee)  Yearly fee: based on the number of shares, $27, 500

19. PUBLIC VS. PRIVATE  Both the NASDAQ and the NYSE are public companies  Both are also traded on the stock market

20. BULLS AND THE BEARS  Figure of speech used to describe the condition of the stock market  Bull market- a market in which stock prices are rising, encouraging buying  Bear market-a market in which stock prices are falling, encouraging selling

21. VALUE OF STOCKS  Stock prices change every day as a result of market forces. By this we mean that share prices change because of supply and demand. If more people want to buy a stock (demand) than sell it (supply), then the price moves up. Conversely, if more people wanted to sell a stock than buy it, there would be greater supply than demand, and the price would fall.  The stock price also reflects the growth that investors expect in the future

22. CHOOSING STOCKS  You have to figure out what news is positive or negative for a company  Every investor has their own ideas and strategy  Price movement of a stock indicates what investors feel a company’s stock is worth

23. VALUE  The amount of money a company makes (profit) is what gives the stock value, or makes it worth money  If a company never makes money, they won’t stay in business  Public companies must report their earnings 4 times a year  Investors pay close attention to the earnings reports when they are released

24. MARKET CAPITALIZATION  There are two areas that determine a company’s worth  Market capitalization is a big factor in determining a company’s worth on the stock market  Stock price multiplied by the number of shares outstanding  Example:  a company that trades at $100 per share and has 1 million shares outstanding has a lesser value than a company that trades at $50 that has 5 million shares outstanding ($100 x 1 million = $100 million while $50 x 5 million = $250 million)

25. MAIN POINTS TO REMEMBER  At the most fundamental level, supply and demand in the market determines stock price.  Price times the number of shares outstanding (market capitalization) is the value of a company. Comparing just the share price of two companies is meaningless.  Theoretically, earnings are what affect investors' valuation of a company, but there are other indicators that investors use to predict stock price. Remember, it is investors' sentiments, attitudes and expectations that ultimately affect stock prices.  There are many theories that try to explain the way stock prices move the way they do. Unfortunately, there is no one theory that can explain everything.