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The many roles of financial markets Fatih Ayık
 

The many roles of financial markets Fatih Ayık

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    The many roles of financial markets Fatih Ayık The many roles of financial markets Fatih Ayık Presentation Transcript

    • FATİH AYIK
    • Outline
      • Introduction
      • Choice of Consumption
      • The Role of Management
      • Financial Markets and Information
    • Introduction
      • The Growth of Financial Markets
      • The Share of Banks Fall
      • Securities Markets and Financial Derivatives increase
      • The role of banks in the economic system
    • Introduction
      • Securities markets criticized:
      • they are driven by speculation
      • they consume too many resources
      • Financial markets for effective allocation
    • Choice of Consumption
      • Financial markets:
      • Enable to consume and to exchange
      • Allow efficient risk-sharing
      • Two types of risks:
      • Diversifiable
      • Nondiversifiable
    • Choice of Consumption
      • Diversifiable risk can be eliminated
      • Transfer of non-diversifiable risk
      • Financial markets offer an array of financial instruments
    • Choice of Consumption
      • For example:
      • Extremely risk-averse investors may invest to risk-free securities.
      • More risk tolerant investors may invest risky stocks.
      • Intermediate risk preferences may choose a conbination of bonds and stocks.
    • The Role of Management
      • Financial markets enable seperation of ownership
      • A professional maneger can be delegated
      • Managers do not need:
      • to know anything
      • to consult shareholders’ own tastes
      • The Role of Management
      • Managers need :
      • to follow only one objective
      • to invest in projects
      • The Role of Management
      • Managers’ objective:
      • is investing in positive net present value projects.
      • maximizes the market value
      • is in the best interest
    • Financial Markets and Information
      • The stock market ;
      • aggregates the diverse opinions of market participants
      • conveys how much the equity of a company is worth
      • leads to the more efficent use of assets
      • enables poor management to be disciplined
      • Financial Markets and Information
      • Stock price may respond in two ways ;
      • Negative way
      • Positive way
      • Stock price is negative:
      • re-examine calculations
      • re-consider plan
    •  
      • Financial Markets and Information
      • Monitoring needs to be done by one party
      • Duplication:
      • may not result in better monitoring
      • would waste resources.
    • Financial Markets and Information Stockholders cannot profitably combine to hire a monitor because of bearing the costs of monitoring to the others.