A video about basic introduction to stock market.

1. STOCK MARKETS
Gaurav Kaushik
#F4U

2. INTRODUCTION
• Dutch East India Company first created the stock ownership system in 17th century.
• Differs fundamentally from owning bonds as bonds entails a contractual obligation
where the firm must pay and stocks provide the unique privilege to vote on the
firm's governance.
• Stocks are traded in regulated exchanges and over the counter, which refers to any
place other than an exchange like online trading.
• World's five top stock exchanges, in terms of their market values, are in the NYSE
and NASDAQ in New York, the LSE in London, the JEG in Tokyo, the SSE in Shanghai.
Collectively, they are estimated to be worth in excess of $40 trillion.

3. PURPOSE
• It is an organized marketplace to raise money, that allows
a competitive space for the best ideas to surface that
promise to generate future cash flow and economic
growth.
• Helps to discover Price.
• It prevents vested interest groups can exert power and
influence for the financial benefit of the few.

4. STOCK SPLIT
• Stock split is when a company issues new shares to existing
shareholders in a way that is proportional to their current
holdings.
• In layman terms this means that more shares of the company are
issued, but the value of that company does not necessarily
change.
• It results in the value that is used to gauge the performance of the
economy at large.

5. DIVIDEND DISCOUNT MODEL
• The word dividends is derived from the Latin roots “dividendum”, meaning thing to
be divided.
• Unlike bond holders who are to be paid contractually over a fixed period of time,
the firm's board of directors decides on dividends that stockholders will receive in
the future.
• To find their value today, these must be converted at a rate that compensates
stockholders to take on this risk of uncertain stream of income from the future. This
is the basic rationale behind the dividend discount model.
• It values a stock as the present value of future dividends.
• The dividends per share, of the firm would be exactly the same if the firm decided to
give all of its earnings back to the stockholders.

6. • Firms that are able to sustain growth for long periods of time are
clearly more valuable to stockholders as they can potentially
benefit from these growth opportunities.
• Firms that can pay for a growing stream of dividends are known as
dividend aristocrats.
• Their solid records of constant dividend growth make them
specially attractive to institutional investors like insurance and
pension funds, who are by law bound to invest in these types of
companies.
DIVIDEND DISCOUNT MODEL II

7. VOLATILITY OF STOCK MARKETS
• Stock markets are volatile places. Experts compare short term price fluctuations to
random walks with no discernible pattern or trend, which makes it impossible to
predict when to enter or exit the market.
• Following the 2008 financial crash, many developed economies are also trying to
deleverage debt by using unconventional tools like quantitative easing or printing
lots of money, and negative interest rates to avoid being stuck in a deflationary
spiral like Japan.
• Thus, turbulence is a fundamental feature of global finance, and the effects of this
volatility can have widespread consequences at all levels of economic activity, from
individual investors to whole national economies.

8. “
”
THE LONG RUN,
WE ARE ALL DEAD
John Maynard Keynes
Keynes was challenging standard economic thinking that claimed markets will self-
correct themselves into equilibrium if only society could wait.
He forcefully argued for immediate state intervention and literally invented the subfield
of macroeconomics, which studies how the whole economy operates.

9. CRISIS SHAPE FINANCE
Cheap
Money
Rapid
expansion
of credit
Turbulence
sets in
Expectation
of rising
prices
Exagerating
volatility

10. YOU CANNOT BEAT THE MARKET!!
The stock market provides both a danger and an opportunity for all of us.