stock market trend and understanding.ppt

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2. What Causes Stock Market
Prices to Plummet

3. Company Related Factors Of Stock Market
Company is incurring
losses
product failures
Amassing debt
Then a majority of the
shareholders would want to
dump the shares of such a
company, reducing the
stock price.
Other factors
Changes in the
management
Mergers and
acquisitions(gain control
of 50 percent shares).

4. Company related factors of stock market
Earnings reports
The suspension of dividends
The hiring or firing of company executives
Allegations of fraud or negligence

5. Supply and demand for stock market
It is simple: Like all commodities, an imbalance
between supply and demand will raise and lower the
price of stock.

6. Investor sentiment for stock market
Taking greater risks & investing aggressively, confidently
then stock prices will go up.
There are two factors in this aspect:
Bullish market:
Bearish market:

7. Investor sentiment for stock market
if investors are more subdued, choosing safety over risk,
then the stock prices will come down.
There are two factors in this aspect:
Bullish market:
Bearish market:

8. Investor sentiment for stock market
Bearish market:
investor is more worried about risks and losing his or her
investment and therefore, invests with lesser confidence
with safety in mind. This causes the stagnation of the
market and the stock price eventually comes down.

9. Investor sentiment for stock market
Bullish market:
When more people are investing confidently, demand
goes up, leading to increased stock prices.

10. Dissatisfactions of the investors due to
•There is limited exposure of banks & financial
institutions,
•(If a customer encounters unexpected financial problems, a bank may seek to reduce
its credit exposure to mitigate the loss that may arise from a potentialdefault. For
instance, a credit card user who misses a payment may be forced to pay a penalty fee
and a higher interest rate on future purchases. This practice reduces the overall credit
exposure to the card issuer.)
•
Investor sentiment for stock market

11. Dissatisfactions of the investors due to
•lack of availability of authentic information for the
investment
•
•Limited knowledge of risk management,
•Inefficiency of Securities and Exchange Commission
which lead to stock market crash.
ref[1]Cause and Effect Analysis of Stock Market Crash during 2010-11 and Investors’
Impression: Md. EdrichMolla
Investor sentiment for stock market

12. The technology bubble burst of 2000
Due to innovative products and services , valuations of
IT companies in the US and other global stock markets,
including went through the roof.
Finally, the overvaluation bubble burst in 2000,
Many dot-com startups went out of business after
burning through theirventure capitaland failing to
becomeprofitable
Nasdaq crashed, and many IT companies lost more than
50% of their valuation. Some even went bankrupt.
Ref[wikipedia]

14. Interest rates affecting stock market
A higher interest rate will
mean that companies have
to pay more for loans,
resulting in lesser profits.
E.g., post dot.com bubble scenario,
first phase 2002 to 08, global central
banks cut interest rates, which
helped economic recovery.
2
nd
phase: global central
banks started tightening
liquidity and increasing
interest rates.as interest
rates kept rising further,
many peoplein the US could
not pay the high
EMIs(equated monthly
installments) and, as a result,
started defaulting on their
mortgages, education loans,
auto loans, business loans, etc.
so bussinessdown and market
down

15. Interest rates affecting stock market
When interest rates are raised, many investors sell or
trade their higher risk stocks for government-backed
securities such as bondsto take advantage of the
higher interest rates they yield and to ensure that their
investments are protected.
This led to the subprime crisis, which started with real
estate and then spread to other sectors of the US
economy. Many US banks, insurance companies,
hedge funds, and other financial institutions went
bankrupt during this crisis. The US stock markets
crashed.

16. Political factors affecting stock market
If the political climate is
dire
With the government
appearing weak
Risk civil of war,
public sentiment
regarding the current
government is not good
e.g. when Donald Trump won the US
Presidential Election in 2016 and
became the US President. As a
result, there was a fall in the US
stock markets and global stock
markets
Government with a weak
developmental
agenda/policies

17. Current events that affect stock market
Terrioristattacks
9/11 attack led to a big fall
in all major US indices –
Dow Jones Industrial
Average (DJIA), S&P 500,
and Nasdaq.
The Dow Jones Average
was down more than 14%,
the S&P 500 Index
plunged 11.6%, and the
Nasdaqdropped16%.
roits

19. Natural calamities affecting stock market
Calamities like
Hurricanes
Floods
earthquakes
Pandemics
This happens due to
destruction of property ,assets, breakdown of
manufacturing and transport of goods, shotageof
supplies, power outages etc.

22. Impact of hurricanes on us stock exchange
Hurricane Dates Damage US STOCK
DEC
Area
/industry hit
Patricia 20 -24 October
2015
$325 million 2%
Sandy 22 -29 October
2012
$71.4 billion 0.5%
Irene 21 -28 August
2011
$15.8 billion 0.5%
Ike 1 -15 September
2008
$29.5 billion5
Wilma 15 -25 October
2005
$20.6 billion 1.89%
Rita 18 -26 September
2005
$12 billion 1.89%
Katrina 23 -30 August
2005
$108 billion 1.89%

23. Exchange rates affecting share price
Foreign currency rates have a direct impact on the
price and value of stocks in foreign countries, and
changes in exchange rates will increase or decrease the
cost of doing business in a country
Import Bill of many imported products/bussiness will
increase resulting in less profit or loss to
companies/bussiness

24. Recommended readings and references
•[1]Cause and Effect Analysis of Stock Market Crash during 2010-11 and
Investors’ Impression: Md. Edrich Molla, Bangladesh Journal Of Administration
And Management Volume-29 January-June 2018,
•[2]Stock Market Crash in Bangladesh: The Moneymaking Psychology of
Domestic Investors Md. Tahidur Rahman, American Journal of Theoretical and
Applied Business
•[3]The 2008 Financial Crisis: How Deregulation Led to the Crisis Katherine
Bentley Lake Forest College, [email protected]
•[4]The Effect of COVID-19 Pandemic on Stock Market: An Empirical Study in
Saudi Arabia* Jumah Ahmad ALZYADAT1, Evan ASFOURA
•Impacts Of Severe Natural Catastrophes On Financial Markets, Mahalingam, A,
Cambridge Centre Of Risk Studies
•wikipedia
•Google
•bloomberg

25. ABBREVATIONS/DEFINATIONS
Standard & Poor's(S&P):
company well known around the world as a creator of
financial market indices ,an issuer of credit ratings for
companies and debt obligations. often-cited S&P 500 Index.
NASDAQ:
National Association of Securities Dealers Automatic
Quotation System . Nasdaqis the second-largest stock
exchangein the world/Newyork.
Dow Jones Industrial Average (DJIA):
benchmark index in the U.S. for blue-chip stocks. The
DJIA is a price-weighted index that tracks 30 large, publicly-
owned companies

26. ABBREVATIONS/DEFINATIONS
Drawdown;
A decline in an investment or fund.
A drawdown isa peak-to-trough decline during a
specific period for an investment, trading account, or
fund. A drawdown is usually quoted as the percentage
between the peak and the subsequent trough.
A hedge fund is a pooled investment fund that trades in
relatively liquid assets and is able to make extensive use of
more complex trading, portfolio-construction, and risk
management techniques in an attempt to improve
performance Wikipedia

28. Questions?