An Introduction to Financial Markets - Business Finance - ثاني ثانوي

4 An Introduction to Financial Markets T Why do you think financial markets are important? The King Abdullah Financial District in Riyadh

LEARNING OBJECTIVES Once you have completed this chapter, you should be able to: Give an overview of financial markets 1 and the security trading process. Understand the mechanics of investing 2 in securities. Describe specialized securities including 3 margin purchasing and short sales. 4 Explain different measures used to track security prices. 5 Explain alternative foreign securities. 6 Describe the impact of competition in securities markets. 141

كو السعودي 2020 The Arabian Peninsula has been a center for trade since ancient times. T These traders would take frankincense and myrrh to Roman markets by camel caravans along the Incense Route. Traders faced risks in purchasing in one market while transporting and selling in other markets. These markets were not regulated and investors faced the risk of loss. Nevertheless, trade required the exchange of money in different markets by negotiating exchange rates. Currency exchangers would make money on a spread, or the difference between their purchase price and their sales price. Traders have always looked for ways to lower risks. One strategy is to share the risk of ownership across a number of investors. A company, or group of people who act as a single entity, can share risk by creating a corporation. This gives each person who invests in the corporation legal ownership represented by shares of stock. Because investors have stock ownership, they can buy and sell the shares in a secondary stock market. To share the risk of international trade, in 1602 the Dutch East India Company became the first publicly traded company to sell stock and pay dividends to investors. In 1611, the Amsterdam Stock Exchange was created to facilitate the trading of the Dutch East India Company stock. Soon after, other international trading companies incorporated and traded their stocks in exchanges. Not all of these companies were successful, and many individuals lost their investments. This chapter considers securities markets, with a focus on both international and Saudi Arabian stock markets. Financial markets will be explained along with the role of brokers and securities dealers, the mechanics of investing, measures of security pricing, and foreign securities. The chapter ends with a discussion of the efficient market hypothesis, which suggests that over a period of years few investors will outperform the market. How do currency exchange make money on a spread? مانتا ریال 20x 100