the share

Topics: Stock market, Stock exchange, Stock Pages: 3 (963 words) Published: November 26, 2013
The prevailing trend of share/capital market has a direct impact on banking stability – evaluate the statement This paper explains the workings of a stock market as well as its effects on a country’s economy. The main point of this paper of to prove that the volatility of a country’s capital market can have a negative effect on banking stability of a country. The fall of a country’s capital market could mean the demise of the country’s banking sector as well. Basic Explanation of the Stock Market

A stock is a partial ownership of a corporation, which is issued for sale in order for the corporation to generate money (to cover startup costs etc.). A stock entitles the owner to the growth and a share of profits and increments of the corporation. Stocks are issued at stock exchanges, which is where stocks are bought and sold. Each nation has its own major stock exchange. The Major stock exchange of Bangladesh is the Dhaka Stock Exchange (DSE). The largest stock exchange in the world is the New York Stock Exchange, located in the USA. Stocks are initially priced by the corporation issuing the stock. After is has been issued in the stock exchange the market forces of the stock market determine its price. The price of stocks is determined by the forces of demand and supply much like the market forces in the market for goods and services. However, these fluctuations in the market forces occur due to several factors, such as, quarterly earnings, reputation of the corporation, labor union actions, etc. For example, if the quarterly earnings of a corporation are significantly lower than their previous figures, shareholders may wish to rid themselves of the stock before profitability declines further. This will increase the supply of shares in the market, thus lowering the price. Each stock market has an index which indicates the overall standing of the price of stocks in a particular market, economy, etc. Stock brokers use this system to their advantage to earn money....

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