tailieunhanh - Charles J. Corrado_Fundamentals of Investments - Chapter 5

CHAPTER 5 The Stock Market On May 17, 1792, a group of commodity brokers met and signed the now famous Buttonwood Tree Agreement, thereby establishing the forerunner of what soon became the New York Stock Exchange. Today, the NYSE is the world’s largest and best known stock exchange. | CHAPTER 5 The Stock Market On May 17 1792 a group of commodity brokers met and signed the now famous Buttonwood Tree Agreement thereby establishing the forerunner of what soon became the New York Stock Exchange. Today the NYSE is the world s largest and best known stock exchange. In 1998 the NYSE transacted more than 7 trillion in stock trades representing over 150 billion shares. Established in 1971 and less well known Nasdaq executes trades for a similar number of stock shares. Together the NYSE and Nasdaq account for the majority of stock trading in the United States. With this chapter we begin in earnest our study of stock markets. This chapter presents a big picture overview of who owns stocks how a stock exchange works and how to read and understand stock market information reported in the financial press. A good place to start out is by looking at stock ownership. Who Owns Stocks If you invest in common stock you will find yourself in generally good company. More than one in every three adult Americans owns stock shares directly or owns them indirectly through a defined contribution pension fund or stock mutual fund. Interestingly only about 38 percent of all stockholders in 1992 had brokerage accounts attesting to the importance of mutual funds and defined contribution pension funds. Stock ownership has become increasingly democratic in recent decades. For example in 1962 the wealthiest percent of American households owned 75 percent of all 2 Chapter 5 publicly traded stock. In contrast by 1992 the wealthiest 18 percent of households owned less than 50 percent of all publicly traded While the number of individual investors owning stock has increased in recent decades the proportion of all outstanding stock shares held directly by all individuals has actually declined. For example individual investors held about 50 percent of the then trillion total value of all publicly traded . stocks in 1992 down from 84 percent in 1965. However .