Prof. Tyler yamazaki

 
Stock Market
A stock market, to say the very least, is a place for buying and selling
stocks. It also acts as an indicator of the economic cycle. When the
economy is doing well, the prices of stocks tend to increase in the market,
generally. However, when the economy is down, you can also expect the
prices of stocks to decline, this can be true even for a very good stock. It is
also worth noting that the prices of stocks primarily depend on the
performance of the business. When a business is doing well, the price of its
stocks will also tend to increase; the opposite would happen if the business
is not earning well. Of course, there are odd cases where speculators buying
into a stock that is not doing well at all, which will result in a high stock
price even for a crappy company, but that is another story for another time.
Now, the question remains: Why do businesses offer stocks? The reason is
that it helps businesses to raise funds in order to finance their projects,
whether for the expansion of the business, or for their day-to-day activities,

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or just for the sake of it to keep their stakeholders happy. Money, after all, is
the lifeblood of every business.
Stock
A stock, also referred to as a share, signifies ownership of a company.
When you buy stocks from a company, you get to exercise rights of
ownership of the company, such as a claim on the company’s earnings and
assets, as well as voting rights. Take note that there are many kinds of
stocks. But, when you hear investors talk about the stock market, they
usually refer to common stocks.
Stock Market Index
When people talk about stocks, you may hear them talk about how the
market rises or falls in a day. However, when you take a look at the stock
market, you may see that not all of the stocks rise or fall on that day. The
way to understand this is to know the stock market index, or indices
(plural).
There are many stocks listed on the stock exchange. Similar stocks are
grouped together and formed an index. The way these stocks are grouped
together may be based on capitalization, industry, company size, and other
factors. Since they are grouped together, any change in the value of the
stocks that belong to a particular index will affect the value of the index.
Famous indices in the world are, but not limited to, the following: Dow
Jones, Nasdaq, and S&P 500.
Having an index is a good way to sort the different kinds of stocks in the
market. After all, the stock market is composed of so many stocks. It will be
chaotic if you do not sort similar stocks together. It is also a point of
reference for comparison. You can compare the trend of the index value
with the trend of the price of particular stocks that belong to that same
index. You can also compare one index with another index and see which
industry may be a profitable investment.
Since there are countless of stocks in the market, and the index is able to
sort all of them out in an orderly way, an index acts as a good representation

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of the entire market. For example, if you take a look at the index of the IT
industry, then you will know the average performance of the stocks in the
IT industry. This applies to other industries. Of course, there are other ways
to make comparisons depending on how the stocks are sorted in an index.
How the stocks are grouped together determines the type of classification of
the index. For example, in a world stock market index, such as in the S&P
Global 100, you will find stocks that are found across the world. These are
the stocks that come from different regions in the world, such as from Asia
and Europe. There is also what is called as national index. As the name
implies, this type of index considers the performance of the stock market in
a particular nation. You can also find a more specific index that shows the
behavior of the stock market on a regional level. An index can also be
grouped based on the method used to sort them based on price. In a price-
weighted index, the price of each stock is the only thing that is considered
to determine the value of the index. Therefore, any change in the value of
any of the stocks that belong to the same index will cause a corresponding
change to the value of the index concerned. There is also what is referred to
as a sector index. This will allow you to benchmark a particular industry or
sector. A sector index is formed by assigning a particular industry
classification based on the business of a company. Companies that have the
same principal business are then grouped together to form a market sector.
There are other indices that you can find. Just take note that indices are
based on how they are classified. When analyzing the stock market, it is
good to study different indices, so that you can have a better understanding
of what is really happening in the stock market.