货币银行 Chapter 6 英文原版教材课件

1、Chapter 6The Structure and Performance of Securities MarketsLearning ObjectivesDifferentiate the types of financial markets including auction, brokered, and dealer marketsDescribe the differences and functions of the primary and secondary marketsUnderstand the function and determination of bid/ask s

2、preadsExplain the efficient market hypothesis and its relevance to the allocation efficiency of financial markets2Nature and Function of Securities MarketsAll markets bring sellers and buyers togetherPrice balances supply and demand for the securities by all potential market participantsKey role of

3、markets is to provide information to buyers/sellersMarkets reduce transaction costsBuyers and sellers may be unaware of each otherDifferent locationsDifferent times3Nature and Function of Securities Markets (Cont.)In real world, prices that approach the true equilibrium is best we can hope forSecuri

4、ty markets are organized to bring buyers and sellers together, so both parties will be satisfied that a fair transaction price has been arrangedAuction MarketBuyers and sellers confront each other directly to set the priceEither a single trade between all parties at a single price or a series of tra

5、des at different prices4Nature and Function of Securities Markets (Cont.)Auction Market (Cont.)Particular rules of the auction determine exactly how buyers and sellers are matched up.All buy/sell orders are centralized so highest bidders and lowest offers are exposed to each otherMost popular exampl

6、e of a securities auction market is the New York Stock ExchangePostsSpecific locations where auctions for individual securities take placeSpecialistsIndividual designated by the exchange to represent buy/sell orders tendered by customers5Nature and Function of Securities Markets (Cont.)Brokered Mark

7、etsBuyers/sellers employ services of a broker to search for information about the “other side of the tradeBrokers role is to provide informationBrokers earn a commissionReal estate brokersprovide information for buyers/sellers of homesMunicipal bonds are traded primarily in a brokered market6Nature

8、and Function of Securities Markets (Cont.)Dealer MarketsSecurity dealers sell/buy for their own accountHelp to stabilize the marketCommit own capital in process of bringing sellers and buyers togetherExpect to earn a profit by “buying low and selling highTake a risk on a change of price in the secur

9、ities they own 7Nature and Function of Securities Markets (Cont.)Dealer Markets (Cont.)Most securities trade in dealer marketsOver-the counter (OTC)Network of dealers linked together by telephone or computersMost trades take place in a partially automated electronic stock market called NASDAQNationa

10、l Association of Security Dealers Automated Quotation SystemNew York Stock Exchange is a cross between a dealer market and an auction market.8Nature and Function of Securities Markets (Cont.)Dealer Markets (Cont.)Organizational structure of a dealer market and technological information keep transact

11、ion prices as close to true equilibrium as is economically feasibleGood marketability of a security implies it can be sold, liquidated, and turned into cash very quickly without a collapse in price9Nature and Function of Securities Markets (Cont.)Primary Versus Secondary MarketsSecondary MarketDeal

12、in existing securities (second-hand markets)ExamplesNew York Stock Exchange and Tokyo Stock Exchange10Nature and Function of Securities Markets (Cont.)Primary Versus Secondary Markets (Cont.)Primary MarketsDeal in newly issued securitiesInvestment BanksDistribute newly issued stocks and bonds to inv

13、estorsAlso trade in the secondary marketDissemination of information to issuer and potential buyers about price and tradingUnderwritingInvestment bank guarantees a price on the new issue11Nature and Function of Securities Markets (Cont.)Primary Versus Secondary Markets (Cont.)Primary Markets (Cont.)

14、Investment Banks (Cont.)Underwriting SpreadFee earned by investment bankersTrading in this market is not in a physical market, but electronically or personally between the investment bankers and ultimate investorsusually large institutional investorsTombstoneAnnouncements of successful underwritings

15、 (Figure 6.1a)12Newspaper advertisement (A “tombstone)An underwriting syndicate floats a new issue. Source: Wall Street Journal, November 26, 200213Nature and Function of Securities Markets (Cont.)Primary Versus Secondary Markets (Cont.)A close interrelationship between prices and yields on securiti

16、es in secondary markets and those in primary marketsHigh prices in the secondary market will generally indicate high prices can be expected with primary issues14Efficiency of Secondary Market Trading Efficient markets result in a transaction price close to true equilibrium pricehighly liquidLow tran

17、saction costs-timely informationWalrasian auctionAuctioneer announces the price and asks buyers/sellers to submit quantities they want to buy or sellIf not equal, auctioneer raises or lowers price until the market clearsquantity demanded is equal to quantity suppliedExchange occurs at single equilib

18、rium price15Efficiency of Secondary Market Trading (Cont.)Financial markets operate differently with transactions occurring continuously throughout the day at different pricesDealers (market makers) quote a bid price at which they will buy (sellers supply curve) and an offer price at which they will

19、 sell (buyers demand curve)16Efficiency of Secondary Market Trading (Cont.)Dealers objective is to sell inventory that has been purchased before the equilibrium price has an opportunity to changeSince buyers/sellers are concerned that equilibrium price might change before the auction occurs, they ma

20、y chose to transact at dealers bid and offer price.17Efficiency of Secondary Market Trading (Cont.)Measure of LiquiditySpread between bid and asked pricesBid PriceWhat dealer is willing to pay (supply curve) (Figure 6.1)Asked PriceWhat sellers are willing to accept (demand curve) (Figure 6.1)Perfect

21、ly competitive markets trade at equilibrium pricebid and asked prices are identical.Wider bid-asked spreads indicate high transaction costs, lack of information and transaction prices will differ considerable from equilibrium prices18FIGURE 6.1 Bid-asked spreads cause actual transactions prices to h

22、over about the true equilibrium price.19Efficiency of Secondary Market Trading (Cont.)Measure of Liquidity (Cont.)Dealer will quote a narrow bid-asked spread if:Expected value of transactions is largeExpected risk of large equilibrium price change is lowCompetitive pressures from other dealersAlthou

23、gh the spread is shown as a dollar amount, comparison with the price indicates the percentage variationIn general, higher transaction costs for equities result in a larger spread which reflects the greater risk of price fluctuation 20Efficiency of Secondary Market Trading (Cont.)Ability of a market

24、to handle large trades of institutional investorsDoes a large buy/sell order shift demand/supply curve and significantly alter the equilibrium priceCharacteristics of a stable marketlow price volatilityDepth of marketeasy to uncover buy/sell orders above and below current pricesBreadth of marketorde

25、rs above/below current prices exist in large volumeResilience of marketnew orders quickly pour in which prices move up or down21Efficiency of Secondary Market Trading (Cont.)Thin Marketsonly a small volume of trading can be absorbed without causing wide price swingsEquilibrium price changes are part

26、 of everyday price movementReflect basic changes in supply/demandReadily available information permits traders to continuously monitor prices and quickly enter the market when prices deviate from equilibriumContributes to price stability and liquidity22Efficient Capital Marketsand RegulationEfficien

27、t Capital marketCurrent price of a security reflects all publicly available informationChanges in information will cause the demand/supply curves to shift, resulting in a change in the expected equilibrium priceThe issue is how quickly does the market absorb new information, resulting in a price changeCan individual investors earn above-average returns by trying to “second-guess the