Trắc nghiệm kiến thức Forex : https://tracnghiemforex.com The Stock Market Trắc nghiệm kiến thức Forex : https://tracnghiemforex.com/ Advisory Board Alan L Carsrud Professor of Industrial and Systems Engineering, Clinical Professor of Management, and Executive Director of the Eugenio Pino and Family Global Entrepreneurship Center, Florida International University Alan Reynolds Senior Fellow Cato Institute Wesley B Truitt Chairman and Series Editor Adjunct Professor Anderson Graduate School of Management University of California, Los Angeles Walter E Williams John M Olin Distinguished Professor of Economics George Mason University Charles Wolf Jr Senior Economic Advisor and Corporate Fellow in International Economics The RAND Corporation Trắc nghiệm kiến thức Forex : https://tracnghiemforex.com/ The Stock Market RIK W HAFER AND SCOTT E HEIN GREENWOOD GUIDES TO BUSINESS AND ECONOMICS Wesley B Truitt, Series Editor GREENWOOD PRESS WESTPORT, CONNECTICUT  LONDON Trắc nghiệm kiến thức Forex : https://tracnghiemforex.com/ Library of Congress Cataloging-in-Publication Data Hafer, R W (Rik W.) The stock market / Rik W Hafer and Scott E Hein p cm — (Greenwood guides to business and economics, ISSN 1559–2367) Includes bibliographical references and index ISBN 0–313–33824–8 (alk paper) Stock exchanges Stock exchanges—United States I Hein, Scott E., 1949– II Title HG4551.H23 2007 332.64'2—dc22 2006029484 British Library Cataloguing-in-Publication Data is available Copyright # 2007 by Rik W Hafer and Scott E Hein All rights reserved No portion of this book may be reproduced, by any process or technique, without the express written consent of the publisher Library of Congress Catalog Card Number: 2006029484 ISBN: 0–313–33824–8 ISSN: 1559–2367 First published in 2007 Greenwood Press, 88 Post Road West, Westport, CT 06881 An imprint of Greenwood Publishing Group, Inc www.greenwood.com Printed in the United States of America The paper used in this book complies with the Permanent Paper Standard issued by the National Information Standards Organization (Z39.48–1984) 10 Trắc nghiệm kiến thức Forex : https://tracnghiemforex.com/ To Gail and Cait Ellen, Tracey, and Jocelyn Trắc nghiệm kiến thức Forex : https://tracnghiemforex.com/ Trắc nghiệm kiến thức Forex : https://tracnghiemforex.com/ Contents Illustrations ix Series Foreword by Wesley B Truitt xi Preface and Acknowledgments xv Chronology xvii Introduction A Brief History of the U.S Stock Market Stocks in Today’s Economy 37 Today’s Stock Market in Action 55 Recent Innovations in Stocks and Stock Markets 69 Regulation of the Stock Market 85 Stock Markets Abroad 101 Summing It Up 119 Appendix: Companies Listed in the Dow Jones Industrial Average 123 Glossary 127 Bibliography and Online Resources 133 Index 137 Trắc nghiệm kiến thức Forex : https://tracnghiemforex.com/ Trắc nghiệm kiến thức Forex : https://tracnghiemforex.com/ Illustrations FIGURES 1.1 Dow Jones Industrial Average: Close, 1950–2006 2.1 Dow Jones Industrial Average: Close, 1900–1910 15 2.2 Dow Jones Industrial Average: Close, 1910–1935 19 2.3 Dow Jones Industrial Average: Close, 1980–1990 24 2.4 Dow Jones Industrial Average: Close, 1990–2005 30 7.1 Dow-Nikkei-FTSE and Adjusted Dow-Nikkei-FTSE, 1989–2005 113 7.2 Economic Growth before and after an Exchange Is Opened 116 TABLE 7.1 Exchanges Ranked by Market Capitalization in U.S Dollars, End of 2004 102 Trắc nghiệm kiến thức Forex : https://tracnghiemforex.com/ 134 Bibliography Siegel, Jeremy J Stocks for the Long Run: The Definitive Guide to Financial Market Returns and Long-Term Investment Strategies, 3rd ed New York: McGraw-Hill, 2002 Sobel, Robert A History of the New York Stock Exchange, 1935–1975 New York: Weybright and Talley, 1975 ——— The Big Board: A History of the New York Stock Market New York: Free Press, 1965 ——— The Great Bull Market: Wall Street in the 1920s New York: WW Norton, 1968 Teweles, Richard J., and Edward S Bradley The Stock Market, 5th ed New York: John Wiley, 1987 Western, David L Booms, Bubbles and Busts in US Stock Markets London: Routledge, 2004 Wigmore, Barry A The Crash and Its Aftermath: A History of Securities Markets in the United States, 1929–1933 Westport, CT: Greenwood Press, 1985 ARTICLES Allen, Franklin, and Richard Herring ‘‘Banking Regulation versus Securities Market Regulation.’’ The Wharton School Financial Institutions Center, Working paper 01–29 (2001) Baier, Scott L., Gerald P Dwyer, Jr., and Robert Tamura ‘‘Does Opening a Stock Exchange Increase Economic Growth?’’ Journal of International Money and Finance (April 2004): 311–331 Dwyer, Gerald P., Jr., and R.W Hafer ‘‘Are National Stock Markets Linked?’’ Federal Reserve Bank of St Louis Review (November/December 1988): 3–14 Claessens, Stijn, Daniel A Klingebiel, and Sergio L Schmulker ‘‘The Future of Stock Exchanges in Emerging Economies: Evolution and Prospects.’’ BrookingsWharton Papers on Financial Services (2002): 167–202 Greenspan, Alan ‘‘The Challenge of Central Banking in a Democratic Society.’’ Remarks delivered at the Annual Dinner and Francis Boyer Lecture of the American Enterprise Institute for Public Policy Research, Washington, D.C., December 5, 1996 Available at www.federalreserve.gov/boarddocs/speeches/ 1996 Greenwald, Bruce, and Jeremy Stein ‘‘The Task Force Report: The Reasoning behind the Recommendations.’’ Journal of Economic Perspectives 2, no (Summer 1998): 3–23 Haddock, David D ‘‘The Swiftness of Divine Retribution and its Tendency to Mistake its Target: An Analysis of the Brady Report.’’ In The Stock Market: Bubbles, Volatility, and Chaos, eds Dwyer and Hafer, 179–195 Boston: Kluwer, 1990: Hall, Robert ‘‘Struggling to Understand the Stock Market.’’ American Economic Review 91, no (2001): 1–11 Trắc nghiệm kiến thức Forex : https://tracnghiemforex.com/ Bibliography 135 Ho, Ron Yiu-wah, Roger Strange, and Jenifer Piesse ‘‘The Structural and Institutional Features of the Hong Kong Stock Market: Implications for Asset Pricing.’’ The Management Centre Research Papers, King’s College, London 2004 Jorgenson, Dale W ‘‘Information Technology and the U.S Economy.’’ American Economic Review 91, no (2001): 1–32 Levine, Ross, and Sara Zervos ‘‘Stock Markets, Banks and Economic Growth.’’ American Economic Review 88, no (1998): 537–558 Macey, Johnathan R ‘‘Regulation and Disaster: Some Observations in the Context of Systemic Risk.’’ Brookings-Wharton Papers on Financial Services (1998) Parry, Robert T ‘‘The October ’87 Crash Ten Years Later.’’ Federal Reserve Bank of San Francisco Economic Letter 96–332 (1997) ONLINE RESOURCES US Stock Exchanges (Indexes) American Stock Exchange (AMEX), http://www.amex.com Dow Jones Industrial Average (DJIA), http://www.djindexes.com/mdsidx National Association of Securities Dealers Automated Quotations (NASDAQ), http://www.nasdaq.com New York Stock Exchange (NYSE), http://www.nyse.com Russell Index, http://www.russell.com/us/indexes/us Wilshire Index, http://www.wilshire.com/Indexes Related Exchanges Chicago Board of Trade, http://www.cbot.com Chicago Mercantile Exchange, http://www.cme.com International Stock Exchanges (Indexes) Euronext (Euronext 100), http://www.euronext.com Frankfurt (DAX), http://deutsche-boerse.com Hong Kong (Hang Seng), http://www.hkex.com.hk London Stock Exchange (FTSE 100), http://www.londonstockexchange.com Tokyo Stock Exchange (Nikkei 225), http://www.tse.or.jp/english Toronto (TSE), http://www.tsx.com Financial Press Barron’s, http://online.barrons.com Bloomberg, http://www.bloomberg.com Trắc nghiệm kiến thức Forex : https://tracnghiemforex.com/ 136 Bibliography The Economist, http://www.economist.com Financial Times, http://www.ft.com/home/us Investor’s Business Daily, http://www.investors.com TheWall Street Journal, http://online.wsj.com Financial Data Hoover’s, http://www.hoovers.com Moody’s, http://www.moodys.com Standard & Poor’s, http://www.standardandpoors.com Government Agencies; Professional Organizations Association of Investment Management and Research (CFA Institute), http:// www.cfainstitute.org Federal Reserve System, http://www.federalreserveonline.org Financial Accounting Standards Board, http://www.fasb.org Futures Industry Association, http://www.futuresindustry.org International Swaps and Derivatives Association, http://www.isda.org National Association of Securities Dealers, http://www.nasd.com Public Company Accounting Oversight Board, http://www.pcaobus.org Securities and Exchange Commission, http://www.sec.gov Securities Industry Association, http://www.sia.com General Information for Investors Investorguide.com, http://www.investorguide.com Investorwords.com, http://www.investorwords.com Trắc nghiệm kiến thức Forex : https://tracnghiemforex.com/ Index American Depository Receipts (ADRs), 75–76, 127 American Stock Exchange (AMX), 4, 18, 57, 75, 98 Archipelago, 56, 111 Asian Crisis, 32 Asymmetric information, 86, 96, 120 At-the-money call option, 82, 127 Balanced fund, 68, 127 Banking Act of 1933, 23, 89, 127 Bank run, 86, 127 Bear market, 29, 47–48, 127 Behavioral finance, 64–65 Berkshire Hathaway, 43–45, 58 Big Bang, 104 Black Friday (1870), 13 Black Monday (1929), 22 Black Monday (1987), 27, 29 Black Tuesday (1929), 22 Blue chip stock, 22, 50, 58, 108 Boesky, Ivan, 24–25 Bond fund, 69, 127 Bonds, 42, 45, 127 Brady, Nicholas F., 92 Brady Report, 93–94, 97 Broker, 39, 63, 127 Buffet, Warren, 43 Bull market, 32, 33, 49, 94, 127 Bush, George W., 95 Buttonwood Agreement, 10–11 Buy and hold, 49, 50 Call options, 81–82, 127 Capital gain, 43, 45 CATS, 109 C Corporation, 127 Chicago Board of Trade (CBOT), 78 Chicago Board Options Exchange (CBOE), 83 Chicago Mercantile Exchange (CME), 26, 27, 78, 93 Circuit breaker, 93–94, 128 Closed-end fund discount, 128 Closed-end fund premium, 128 Closed-end funds, 71–72, 128 Common stock, 41, 45, 46, 128; options contracts, 82 Contagion, 86, 128 Corporate board of directors, 37, 128 Coupon payment, 42, 43 DAX, 108 Dealer, 39, 128 Trắc nghiệm kiến thức Forex : https://tracnghiemforex.com/ 138 Index Deposit insurance, 86 Dilution of ownership, 40 Diversification, 48, 49, 83, 128 Diversification risk, 128 Diversified portfolio, 46, 47 Dividends, 41, 128; capital gains, 43–45; investment strategies, 52; mutual funds, 70 Douglas, William O., 96 Dow Jones Industrial Average (DJIA), 2, 57–59; circuit breaker, 93, companies in, 124–26; Crash of 1929, 19; Crash of 1987, 24; Crash of 2000, 30; ETF, 74 Drexel, Burnham Lambert, 89; Michael Milken, 25 Dynamic hedging/portfolio insurance, 26, 128 Earnings, 128 EDGAR, 99 Efficient markets, 62, 128; behavioral finance, 64 Electronic trading, 2, 109, 121 Enron, 34, 46, 82, 87, 95 Equity fund, 69, 128 Euronext, 102, 110 Exchange regulation, 128 Exchange-traded funds, 74–75, 128 Exercise price, 128; options contract, 81–83 Expectations, 62–63 Expense ratio, 71 Expiration date, 81–82 Federal Reserve Bank (System), 129; Crash of 1929, 20–21; Crash of 1987, 24, 28, 94 Financial Accounting Standards Board (FASB), 97 Financial intermediary, 69 Fisher, Irving, 21, 22 401K programs (403B, for public entities), 127 Frankfurt stock exchange, 102, 107–8 FTSE, 4, 60, 112 Fundamental market analysis, 65, 129 Futures contracts, 77–78, 129 See also Single stock futures contract; Stock index futures contract Global Crossing, 34 Going long, 72 Going short, 72 Gould, Jay, 13 Great Crash (1929), 21, 23 Greenspan, Alan, 26, 28 See also Irrational exuberance Growth stock, 44, 52, 129 Growth strategy, 52 Hall, Robert, 31 Hamilton, Alexander, 10 Hang Seng Index, 107 Harriman, Edward, 16 Hedge fund, 72–74, 129 Heinze, F Augustus, 16 HEKx, 106 Hong Kong Exchange, 102, 105–7 Hoover, Herbert, 19 Income stock, 44 Index mutual fund, 129 Initial public offering (IPO), 38–39, 129 Insider selling/insider stock sales, 34, 129 Insider trading, 120; foreign exchanges, 87, 108; Securities and Exchange Act, 91 In-the-money call option contract, 81, 129 Investment Advisors Act of 1940, 91, 97 Investment Company Act of 1940, 91, 97 Investment grade bond, 129 Irrational exuberance, 29; behavioral finance, 64 Trắc nghiệm kiến thức Forex : https://tracnghiemforex.com/ Index 139 January effect, 64 Junk bond, 25 Kennedy, Joseph P., 96 Knickerbocker Trust, 16 Landis: James, 96; Judge Kennesaw Mountain, 15 Large cap, 50–51, 129 Lender of last resort, 28, 94 Leveraged buyout, 25, 129 Levitt, Arthur, 33 Liquidity, 28, 129; private stock versus public, 40 Listing requirement, 57 Load fund, 70, 129 London Exchange, 104–5, 112, 121 Long position, 79, 80, 81, 129 Long-Term Capital Management (LTCM), 32, 73 Margin, 129 Margin call, 23 Margin investing, 19–20, 130 Margin requirement, 20; futures contract, 78, 79 Market capitalization, 50, 59, 102, 130 Market crash, 130 Market specialist, 121 Market timing, 49–50 Microsoft, 4, 44, 51 Milken, Michael, 25 Mini stock index futures contracts, 79, 130 Morgan, J P., 17, 125 Morse, Samuel F B., 11 Mutual fund, 69–70, 130 See also Closed-end funds; Exchange traded funds; Open-ended mutual funds National Association of Securities Dealers Automated Quotation (NASDAQ), 3, 9, 57; NASDAQ index, 59–60 Net asset value, 70; ETF, 74 New York Stock and Exchange Board, 11 New York Stock Exchange (NYSE), 56–57; history, 9–35; IPO, 111; ownership, 121; self-regulation, 85–86 Nikkei 225, 60, 103–4, 112 No-load fund, 70, 130 Notional value, 79, 130 Ohio Life Insurance and Trust Company, 12 OneChicago, 80 Open-ended mutual funds, 70–71, 130 Option premium, 72, 80, 82, 83, 130 Options contract, 80–83, 130 Out-of-the-money option, 81, 130 Over-the-counter, 130 Panic: of 1857, 12; of 1893, 14; of 1907, 14–18 Parry, Robert T., 28 Pecora, Ferdinand, 88 Pension plan, 130 Phelan, John, 26, 27 Portfolio, 72, 75 See also Diversified portfolio Preferred stock, 41, 44, 130 Presidential Task Force on Market Mechanisms, 92 Price-weighted index, 58 Private stock/private placement, 40, 56, 130 Proprietary index, 61 Public Company Accounting Oversight Board, 96 Publicly traded stock, 40, 55–56, 130; regulations, 90, 96, 97, 99 Put option, 81–83, 130 Qualified investor, 73 Trắc nghiệm kiến thức Forex : https://tracnghiemforex.com/ 140 Index Reagan, Ronald, 92 Return, 43, 44–45, 70, 111, 130 Risk, 45–46, 130; over time, 47–49; portfolio, 46–47 See also Diversification; Systemic risk Roosevelt: Franklin, 88; Theodore, 14 Russell index, 60, 74 Russian collapse, 32 Sarbanes-Oxley Act of 2002, 95–96 Schwab, Charles, 29 S Corporation, 56, 130 Secondary market transaction, 39, 131 Secondary offering, 39–40, 131 Securities Act of 1933, 90 Securities and Exchange Act of 1934, 90–91 Securities and Exchange Commission (SEC), 96–99; oversight of NYSE, 85 Securities Investor Protection Corporation (SIPC), 92 Securities Investors Protection Act of 1970, 92 Security, 131 Self-regulation, 88, 90, 98 September 11, 2001, 34 Share of stock, 131 Shiller, Robert, 64, 67 Short position, 79, 80, 82, 131 Siegel, Jeremy, 50, 53 Single stock futures contract, 80, 131 Small cap, 50–52, 131 SPIDER, 74 Standard and Poor 500 (S&P 500), 59 See also Exchange-traded funds Stock, 131 Stock derivatives, 76–77, 131 Stock exchange, 2, 131; economic growth, 114–17; foreign exchanges compared, 103–10 Stock fund, 131 See also Equity fund Stockholder, 37, 131 Stock index, 3, 131 See also American Stock Exchange (AMEX); DAX; FTSE; HEKx; National Association of Securities Dealers Automated Quotation (NASDAQ); Nikkei 225; Russell index; Wilshire index Stock index futures contracts, 79–80, 131 Stock return, 132 See also Return Stock ticker, 12 Super Bowl, 65 Systemic risk, 86, 132 Technical analysis, 65–66, 132 Tokyo Exchange, 102, 103–4 Tontine Coffee House, 11 Toronto Exchange, 108–10 Transparency, 99, 108 Value investment strategy, 52 Value stock, 132 Wall Street, 10, 12 Wal-Mart, 4, 31, 50, 59 Warburg, Paul, 21 Wealth, 2, 132; stock crashes, 28, 33, 48, 119 Wilshire index, 60 Wilson, Woodrow, 17 Trắc nghiệm kiến thức Forex : https://tracnghiemforex.com/ ABOUT THE AUTHORS RIK W HAFER is Professor and Chairman in the Department of Economics and Finance, and Director of the Office of Economic Education and Business Research, Southern Illinois University, Edwardsville He served as Research Officer with the Federal Reserve Bank of St Louis and his articles on monetary policy and financial markets have appeared in such publications as the Wall Street Journal, International Economic Journal, Economic Review, and the Journal of Business He is the author or editor of several books, including The Stock Market: Bubbles, Volatility, and Chaos, How Open Is the U.S Economy?, and The Federal Reserve System (Greenwood, 2005) SCOTT E HEIN is Briscoe Chair of Bank Management and Finance at Texas Tech University, where he teaches courses in the management of financial institutions, multinational financial management, money and capital markets, and the U.S financial system He also serves as Visiting Scholar at the Federal Reserve Bank of Atlanta and Chief Economist at Islay Opportunity Fund He has published many articles in such publications as the Journal of Financial Research, Applied Financial Economics, and the Journal of Banking and Finance, and is on the board of editors for the Quarterly Journal of Business and Economics Trắc nghiệm kiến thức Forex : https://tracnghiemforex.com/ Recent Titles in Greenwood Guides to Business and Economics The National Economy Bradley A Hansen The Corporation Wesley B Truitt Income and Wealth Alan Reynolds Money Mark F Dobeck and Euel Elliott Trắc nghiệm kiến thức Forex : https://tracnghiemforex.com/ Trắc nghiệm kiến thức Forex : https://tracnghiemforex.com/ Trắc nghiệm kiến thức Forex : https://tracnghiemforex.com/ Trắc nghiệm kiến thức Forex : https://tracnghiemforex.com/ Trắc nghiệm kiến thức Forex : https://tracnghiemforex.com/ Trắc nghiệm kiến thức Forex : https://tracnghiemforex.com/ Trắc nghiệm kiến thức Forex : https://tracnghiemforex.com/