Canadian stock market Example

Essays on Canadian stock market Assignment and Information al affiliation A chart showing TSX bank share prices by and amount of share sold A chart showing BMO share prices by date and amount of share sold Table showing BMO common share price Dates Decrease/ Increase open High Low Close volume adjusted close 24/10/2011 0 59.11 59.66 59 59.49 730100 58.81 28/10/2011 +1.01 60.12 60.65 60.01 60.26 703600 60.26 4/11/2011 -2.58 57.54 57.73 56.53 57.25 732400 57.25 10/11/2011 -0.89 56.65 56.75 55.44 55.9 996600 55.9 18/11/2011 -1.06 55.59 56.09 55.27 55.51 722600 55.51 25/11/2011 -2.81 52.78 53.52 52.74 53.22 400200 53.22 There is a general decrease in prices of common shares for BMO from end of October throughout the period of November. This makes it uncertain for invest thus cannot invest in it. Table showing BMO common share price Dates Decrease/ Increase open High Low Close volume adjusted close 24/10/2011 0 41.62 42.29 41.62 42.10 134700 41.73 28/10/2011 +0.25 42.25 42.71 42.25 42.36 70600 41.98 4/11/2011 +0.31 44.30 44.74 44.29 44.69 68700 44.29 10/11/2011 +0.27 44.57 44.60 44.19 44.31 133100 43.29 18/11/2011 +0.17 44.74 45.28 44.74 44.05 73000 44.65 25/11/2011 -0.23 44.51 44.78 44.48 44.65 102900 44.65 There is a general increase in prices of common shares for TSX from end of October throughout the period of November. This makes it attractive for investors to invest their cash in it Reasons for choosing BMO and TSX Both are financial institutions and it is easy to make comparison as to the general increase or decrease in the prices since they operate within the same economic environment. They are actually subjected to same factors as monetary policy and fiscal policies. Reason for choosing common stock It was easy to monitor the movement in terms of prices on hourly or daily basis unlike in bonds it was tedious on my side. The ease of accessibility made it easier to choose it. What Economic Factors Affect Stock Prices. The sensitivity of stock to the economic environment factors makes it a crucial type of investment that depends on how lucky the prevailing circumstance will be maintained. It proves to be the most dynamic component of the world market. Even though the market can be vibrant and active, stock prices are very volatile and its volatility makes investor more worried about the future of their investment. Investors keep on wondering what will happen on hourly, daily, and monthly and yearly to their investment. Supply and Demand The higher the demand the higher the price and the lower the demand the higher the price this implies that price is directly affected by stock market trends in trading. It means that when a consumers purchase a particular type of stock, its price will automatically increase by a margin slightly higher than the previous one. Similarly when a trader sells that stock, its price will then fall with a margin so that it is slightly lower than the previous trading price. Inflation and Interest Rates Inflation would refer to the general increase in price of commodities as a result of drop in the currency value. Goods would appear expensive to the consumer due to decreased purchasing power. Interest rate is the amount charged by financial institutions as a result of borrowing or lending services. Every stock market is affected by inflation and interest rates. Inflation go hand in hand with interest rate, according to Fischer effect higher the inflation rate higher the interest rate. It is central bank mandates to regulate monetary supply and make necessary policy. These policies affect the interest rate which in turn affects the share price. The perception of the investors and traders on what is likely to happen with interest rates and inflation within any given country will also impact on the stock market prices. The speculative natures of investors also affect the price of stock for instance if People perceive increase or decrease in interest rate will influence the price of stock to either increase or decrease. The interest rate is a good measure of pricing levels of stock, whether they increase or decrease for a certain time period will depend on interest rate. Trade Flows Trade balances and imbalances between two different countries affect the price of stocks. The monetary flows that are brought about by the trading between countries affect the price of a stock. For instance, when a countrys imports exceed its exports, it is likely that the currency will devalue hence causing the price of stock to plunge. However more investments in the country on the other hand will strengthen the currency this will mean that stock prices. Political Activities Political situation prevailing in a given country will affect the prices of stock a great deal. Political instability for instances will cause investors to sell their shares thereby causing the price to decrease since there is nobody is willing to in buy same share at the same magnitude. In the contrary to the above a country with political stability will ensure trading activities are normal and more people are willing to invest thus causing share price to increase. Would you invest in the market? The future of the common market is unclear. According to BMO the prices keep on decreasing non-linearly thus it means the prices of the common share are volatile and the decision to invest in one is based on speculation. According to TSX the prices of common share keeps on increasing making investment decision attractive. It will be very important to analyze closely the market further for about four months to come up with a proper analysis of the market trend. Using above information I can decide to sell my share before it starts deteriorating. Investment decision is mainly made after thorough evaluation of market situation to determine whether a project is viable or not. Most investors gamble around in their quest to make any decision pertaining to selling or buying of shares. Be that as it may consultation needs to done to someone or expert who understand the economic situation of the environment to which stock is trading in.