国际投资学的布鲁诺索尔尼克丹尼斯麦克利维编写的教材配套

Chapter5Equity:MarketsandInstrumentsIntroduction Inthischapterwecover:HistoricaldifferencesinBourses.SomestatisticsaboutstockmarketMarketsize,Liquidity,ConcentrationThefactorsthataffectingthestockmarket(Practicalaspects:taxes,marketindexes,informationavailability)ExecutioncostInvestinginforeignshareslistedathome(ADRs,GDRs,ETFs,Open-endfunds,Closed-endfunds)2HistoricalDifferencesinMarketOrganizationEverystockexchangehasitsownuniquecharacteristicsandlegalorganization.Allexchangeshaveevolvedfromoneofthreeorganizationtypes:PrivateBoursesPublicBoursesBankers’BoursesMarketdifferences:ahistoricalperspective3PrivateBoursesFoundedbyprivateindividualsandentitiesforthepurposesofsecuritiestrading.DevelopedunderBritishinfluenceAmixofself-regulationandgovernmentsupervisionisorientedmoretowardself-regulationthanthepublicbourse.4PublicBoursesDevelopedunderNapoleonIandtheParisBoursefollowedthismodeluntil1990.Commissionsarefixedbythestate.Brokersaregovernmentappointedandenjoyamonopolyovertransactions.FoundinthesphereofFrenchlegalinfluence:France,Belgium,Spain,Italy,GreeceandsomeLatinAmericancountries.Mosthavemovedtowardsaprivateboursemodel.5Bankers’BoursesDevelopedunderGermansphereofinfluence:e.g.Germany,Austria,SwitzerlandandNetherlands.Chieffunctionistoprovideaconvenientplaceforbankstomeet.Maybeeitherprivateorsemi-publicorganizations.Mostbankers’boursesmovedtoaprivateboursemodelinthe1990stoallowforeignfinancialintermediariestobecomebrokers.6HistoricalDifferencesinTradingProceduresCashMarketsTypically,transactionsaresettledwithinthreedays.Mostcashmarketsallowleveragedinvestment.Margintradingisavailable.ForwardMarketsPeriodicsettlementsystem(thisgreatlysimplifiesthesecurityclearingsystem).ExamplesofmarketsthatdevelopedalongtheselinesincludeLondon,Paris,someLatinAmericancountries.1.Cashvs.ForwardMarkets72.Price-Drivenvs.OrderDrivenMarketsAutomatedtradingsystemshavefollowedtwodifferentpaths:Amarketorganizationdominatedbydealersmakingthemarket(alsoknownasapricedrivenorquotedrivenmarket).Amarketorganizationwithbrokersactingasagentsinanauctionsystem(alsoknownasanorderdrivenmarket).8Price-DrivenSystems(DealerMarkets)Forexample,NASDAQMarketmakersstandreadytobuyorsellatpostedprices.Thebidandaskquotesarefirmcommitmentsbythemarketmakertotransactatthosepricesforaspecifiedtransactionsize.OnlyAmericanstockmarketshaveretainedapricedrivenmodel.DifferencesinthedesignoftheAutomatedsystems

9Forexample,Paris,Frankfurt,TokyoTraderspubliclyposttheirordersandthetransactionpriceistheresultoftheequilibriumofsupplyanddemand.Allbuyandsellordersareenteredinacentralorderbookandaneworderisimmediatelymatchedwiththebookoflimitorderspreviouslysubmitted.Toimproveliquidity,mosthaveretainedperiodiccallauctions.Mostemergingmarketshaveadoptedthissystem.Order-DrivenSystems(AuctionMarkets)10Price-DrivenSystems(DealerMarkets)Advantages:Easiertoexecutelargeblocktradesthananorder-drivensystem.Disadvantages:Moreexpensivetooperatethantheorderdrivenmarkets.Requiresmorehumanintervention.11Advantages:Requireslittlehumanintervention.Lesscostlytooperate.Marketswithlessertransactionvolumeshavefounditmoreefficienttoadopt.Disadvantages:Theabsenceofdevelopingmarketmaking(orderswithnopricelimits).Difficultyinexecutinglargetrades.Order-DrivenSystems(AuctionMarkets)12WhatabouttheNYSE?TheNYSEhasdevelopedahybridmarketthatcombinestraditionalfloor-tradingandelectronicauctiontrading.TheautomatedplatformisbasedontheArchipelagosystem.TheelectronicsystemallowsonetofindthebesttransactionpriceontheNYSEorelsewhere.13ElectronicCommunicationNetworks(ECNs)Limitorderbookplaysacentralrole.Order-drivensystem.Manyco-existintheUSA.Virt-Xisapan-EuropeanECNspecializedinbluechips.14ElectronicCrossingNetworks(ECNs)Anonymouslymatchbuyandsellordersofapoolofparticipants,generallyinstitutionalinvestorsandbroker-dealers,atpre-specifiedtimesandatpricesdeterminedintheprimarymarketforthesecurity.IntheUSAthereisPOSIT®.Advantages:Lowtransactioncosts.Anonymity.Disadvantages:Notradingimmediacy.15RecentCross-BorderAlliancesofStockExchangesDuringthisdecade,EuronextrepresentsthesuccessfulmergerbetweenParis,Amsterdam,BrusselsandLisbon.OMXhasbecomethetradingplatformofmostNordicandBalticexchanges.In2023…NYSEandEuronextmerged.DeutscheBoersepurchased5%oftheBombayStockExchange.TokyoStockExchangeannouncedanalliancewithNYSEandtheLondonStockExchange.16Somestatisticsaboutthestockmarket

DevelopedMarketsU.S.andBritishstockmarketcapitalizationsaremuchlargerthantheirrespectiveannualGDP.FranceandGermanyhavestockmarketcapitalizationsthataresmallerthantheirrespectiveannualGDP.Why?MostEuropeancorporationstendtomaintainprivateownership,areundercapitalizedandtendtorelyonbankfinancing.MostU.Scompaniestendtogopublicandraisecapitalinthemarketplace.MarketSize17Exhibit5.1:MarketSizesofDevelopedMarketsBillionsofU.S.dollars,

endof202318Attheendof2023developedmarketshadatotalmarketcapofapproximately$44trillion.OutsidetheUnitedStates,thelargestmarketstendtobeJapan,UnitedKingdomandEuronext.Changesinthetotalsizeandgeographicalbreakdownoftheworldmarketcanbeattributedtocurrencymovements.19However,thefiguresforJapantendtobeinflatedbythepracticeofstockcross-holdingsCross-holdingsoccuramongJapanesecompaniesandfinancialinstitutions(Mochiai).Cross-holdingsarealsoprevalentwiththechaebolsinSouthKorea.Thefreefloatadjustmentisintendedtoeliminatetheeffectofcross-holdings.20Cross-holdingAdjustments–AnExampleQuestion CompanyAowns40%ofCompanyB CompanyBowns30%ofCompanyC CompanyCowns20%ofCompanyA

Eachcompanyhasatotalmarketcapitalizationof$200million.Youwishtoadjustforcross-holdingtoreflecttheweightsofthesecompaniesinamarketweightedindex.Whatadjustmentwouldyoumaketoreflectthefreefloat?21Cross-holdingAdjustments–AnExampleSolution:

Theapparentmarketcapofthesethreecompaniestakentogetheris$600million. Theadjustedmarketcapitalizationis: $160+$120+$140=$420million22EmergingMarketsAttheendof2023emergingmarketshadatotalmarketcapofapproximately$6.8trillion.Emergingmarketshavegrownrapidlysince1980sandrepresentedover13%oftheworldstockmarketcapitalizationattheendof2023.23Exhibit5.2:SizesofEmergingMarketsBillionsofU.S.dollars,endof2023

24LiquidityIlliquiditytendstoimplyhighertransactioncosts.Turnoverratioiscomputedastransactionvolumerelativetomarketcapitalization.Sometimescalled“shareturnovervelocity”.Dependingontheyearsobserved,comparisonofnationalmarketliquiditybasedonturnoverratiocanleadtodifferentconclusions.25Exhibit5.3:AnnualTurnoveronMajorStockMarkets26ConcentrationInvestorsneedtoknowwhetheranationalmarketismadeupofadiversityoffirmsorconcentratedinafewlargefirms.Amarketthatisdominatedbyafewlargefirmsprovidesfeweropportunitiesforriskdiversificationandactiveportfoliostrategies.OntheNYSEandTokyoStockExchange.,thetop10firmsrepresentlessthan20%oftotalmarketcap.Conversely,inSwitzerland,thetop10firmsaccountforapprox.70%oftotalmarketcap.27Exhibit5.4:ShareoftheTenLargestListedCompaniesintheNationalMarketCapitalization28TaxAspectsTaxescanbeappliedin:Investor’scountryInvestment’scountryTransactions,capitalgainsandincome.Theinternationalconventionontaxingincomeistomakecertainthattaxesarepaidbytheinvestorinatleastonecountry,whichiswhywithholdingtaxesareleviedondividendpayments.Somepracticalaspectswheninvestingabroad29StockMarketIndexes

Theseareusedtotrackcountryandregionalmarketsandmeasureperformance.Indexescanbeeither:Marketvalue-weightedindexes.Equal-weightedindexes(e.g.DJIA,Nikkei225).Thereisnowatrendtowardsnarrowbasedindexesbecauseof:ImmediacyExchangeshaveintroducedderivativecontracts.1.Domesticstockindexes30

2.GlobalstockIndexesComputedbyorganizationssuchasFTSE,MSCI,andS&P.EmergingmarketindexesareavailablefromproviderssuchasFTSE,MSCI,S&P,DowJones.AwidelyusedindexisS&P/IFCI(representstheinvestablemarket).TheDowJonesWilshireGlobalIndexcoversdevelopedandemergingmarkets.TheEuroDJSTOXX50isawidelyusedindexofEurozonebluechipsandrepresentscountriesthathaveadoptedtheEuro.Internationalmoneymanagerswillpayparticularattentiontoglobalstockindexesforassetallocationdecisionsandperformancemeasurement.313.WhichIndextoUse?Domesticinvestorstendtopreferlocalindexesbecauseof:Traditionaluse,beavailableeverymorninginallnewspapersImmediacyofinformationwhichminimizescapitaladjustmentandriskoferrorinprices.32InstitutionalInvestorsprefertheMSCI,FTSEorotherinternationalindexesbecause:Pensionfundsdonotneedup-to-the-minuteindexes.Theindexesonallstockmarketsareavailableinacentrallocation,whereaslocalindexesmustbedrawnfromseverallocations.Calculatedinasingleconsistentmanner,allowingfordirectcomparisonsbetweenmarkets.Provideglobalorregionalindexes(World,Europe,etc..)whichinternationalmoneymangersneedtomeasureoverallperformanceTheyprovideindexescum-dividends.33InformationMostdevelopedcountriesarenowenforcingaccountingstandardsofincreasedquality.ManycountriesareadoptingaccountingstandardsthatconformtoInternationalAccountingStandardsorU.Sgenerallyacceptedaccountingprinciples(GAAP).34ExecutionCostsExecutioncostscanreducetheexpectedreturnanddiversificationbenefitsofaninternationalstrategy.Bestexecutionreferstoexecutingclienttransactionssothatthetotalcostismostfavorabletotheclientundertheparticularcircumstancesatthetime.35ComponentsofExecutionCostsWecanlookatthreecosts(listedinorderofdecreasingreliabilityofestimation):Commissions,FeesandTaxes.Explicitandeasilymeasurable.MarketImpact.Dependentonordersize,marketliquidityforthesecurityandthespeedofexecutiondesiredbytheinvestor.OpportunityCosts.Loss(orgain)incurredastheresultofdelayincompletionof,orfailuretocompleteinfull,atransactionfollowinganinitialdecisiontotrade.36EstimationandUsesofExecutionCostsGlobalSurveys:Thesegivemarketaveragesforatypicaltradeineachcountry.VWAP(volume-weightedaverageprice):ThedifferencebetweentheactualtradepriceandtheVWAP

benchmarkpriceisanindicationofexecutioncosts.ImplementationShortfall:Differencebetweenthevalueoftheexecutedportfolio(orshareposition)andthevalueofthesameportfolioatthetimethetradingdecisionwasmade.37Exhibit5.5:ExecutionCostsinBasisPoints38UsingExpectedExecutionCostsTheannualexpectedreturnnetofexecutioncostsismeasuredas:Netexpectedreturn=E(R)-TurnoverratioxExecutioncosts39ImpactofExecutionCosts–anexampleQuestion:BasilRichardsfollowsanactiveinternationalassetallocationstrategyandobservesthefollowingdata.Theaverageexecutioncostforabuyorasellorderisforecastedat0.75percent.Theportfoliohasaturnoverratioof1.2timesayear.Theannualexpectedreturnbeforetransactioncostsis11%.Whatistheannualexpectedreturnnetofexecutioncosts?40ImpactofExecutionCosts–anexampleSolution:Netexpectedreturn=E(R)-TurnoverratioxExecutioncostsNetexpectedreturn=11%-1.2x1.5% =9.2%41SomeApproachestoReducingExecutionCostsWhenengaginginalargetrade,amanagercangetthebestexecutionthroughavarietyoftradingtechniques:InternalCrossingExternalCrossingPrincipalTradeUseofdealer“indicationsofinterest”UseofFuturesAgencyTrade42InvestinginForeignSharesListedatHomeMotivationforMultipleListing:Moreaccesstoforeignownership.Diversifiedownershipreducestheriskofadomestictakeover.Foreignlistingraisestheprofileofthefirminforeignmarkets.Givesaccesstoawidercapitalbaseandincreasesthebusinessvisibilityofthefirm(usefulforemergingmarketfirms).43ADRs—AmericanDepositaryReceiptsForeignsharesaredepositedwithaU.S.bankwhichinturnissuesADRsinthenameoftheforeigncompany.Toavoidunusualshareprices,ADRsmayrepresentacombinationofseveralforeignshares.IntheU.S,therearesome450foreigncompanieslistedonNYSE,representingover10%ofNYSEtransactionvolume.AnADRprogramwithoutthecompany’sinvolvementiscalledanunsponsoredADR.AnADRprogramwiththecompany’sinvolvementiscalledansponsoredADR44SponsoredADRsareoftenclassifiedatthreelevels:LevelI:ThecompanydoesnotcomplywithSECregistrationandreportingrequirements,andthesharescanbetradedonlyontheOTCmarket(butnotNasdaq).Level11:ThecompanyregisterswiththeSECandcomplieswithitsreportingrequirements.ThesharescanbelistedonanofficialUS.stockexchange(NYSE,ASE)orNasdaq.Level111:Thecompany'sADRsaretradedonaUS.stockexchangeorNasdaqandthecompanymayraisecapitalintheUnitedStatesthroughapublicofferingoftheAD&.45ValuationofADRsFormostADRs,thepricequotedbymarketmakersissimplythehomepriceoftheshareadjustedbytheexchangerate.SincetheADRmarketislessliquid,alargebid-askspreadisadded.Influenceoftimezonesshouldalsobepointedout.46ADRs-AdvantagesEasyanddirectinvestmentinforeignfirms.SomeADRsissuedbyemergingmarketcompanieshavelargertradingvolumeonNYSEthanintheirhomemarket.ForsomeADRsissuedbyemergingmarketcompaniesexecutioncostsmaybeloweronU.S.thanonlocalmarkets.47ADRs-DisadvantagesAlimitednumberofcompanieshaveissuedADRs.Tendtobelargecompaniesinhomecountryandthusdonotofferfullinternationaldiversificationbenefit.Forthelargeinvestormayoftenfindtheprimarymarketofoverseascompaniestobemoreliquidandcheaper.48GDRs-GlobalDepositaryReceiptsSimultaneouslylistedonseveralnationalmarkets.Givefirmsaccesstoalargerbaseofnewcapital.GDRshavebeenpopularwithJapaneseandChinesefirms.49ImpactofSarbanes-OxleyActof2023Sarbanes-OxleyActresultedinadditionalcompliancerequirementsonforeigncross-listedcompanies.Thereisstillconsiderablediscussionastowhetherthecompliancecostsou