Arm’s length transactions occur when subsidiaries of a larger company conduct business as if they are not part of the same corporate family. The arm’s length price ensures fair market value and prevents special discounts. This pricing structure benefits sellers, avoids tax issues, and eliminates conflicts of interest. Countries have laws regarding arm’s length pricing […]
Market saturation occurs when a product has been widely purchased, creating a challenge for long-term companies to continue generating revenue. Population growth and influencing attitudes about multiple purchase ownership can help alleviate low sales numbers due to glut. Competition can also play a role in increasing market share. When a product is introduced to consumers, […]
A Market Identification Code (MIC) is used to identify the stock market or financial market where a trade is made. The ISO proposed a universal identification method to facilitate automated processing of transactions, but acceptance has been slow due to various identification systems used globally. A uniform reference method would allow for STP and same-day […]
A secondary market mortgage is sold by loan originators to investors, allowing for quick and easy access to funds. Homeowners don’t notice a difference in their mortgage agreement, and government agencies like Fannie Mae and Freddie Mac offer many mortgage loans on the secondary market. This strategy offers opportunities for investors to achieve consistent returns […]
Market breadth theory suggests that the strength of the stock market depends on the movement of all stocks, not just a few major ones. Indicators such as volume statistics and comparing rising to falling stocks can help identify market trends. Investors use market breadth to determine if the market is trending up or down and […]
A total market index is a benchmark used by the financial industry to monitor the risk and returns of an entire market. It includes publicly traded companies listed on a country’s major stock exchanges and is weighted based on each company’s contribution to the overall index price. Different weighting methodologies are used, such as market […]
Market specialists are financial professionals who provide a market for a particular security, ensuring liquidity and stability. They work with limit orders and can step in to fill orders when public orders are not enough. Market specialists have advantages such as being heavily involved in trading and having professional connections to take advantage of changes […]
The Bond Market Association (BMA) merged with the Securities Industry Association in 2006 to form the Securities Industry and Financial Markets Association (SIFMA). The BMA coordinated transactions and represented around 200 companies that traded debt securities. SIFMA is the US branch of the Global Financial Markets Association and addresses issues relevant to its members, including […]
Market research can be conducted through quantitative or qualitative data collection and analysis. Qualitative research involves subjective discussion and observation, while quantitative research involves numerical statistics. Qualitative research can provide a different insight into market opinion, but it is more expensive and difficult to analyze. Social scientists analyze qualitative data to determine market sentiment or […]
A trending market is when a stock market or securities index moves in a particular direction. Brokers and investors capitalize on trends, while analysts monitor market activity to determine the economy’s health. During times of economic growth, banks lower lending standards, leading to bullish sentiment. Investors take advantage of bull markets by buying stocks while […]
A contestable market has few competitors but a high threat of entry, promoting competition and preventing monopolies. Criteria for a strong entry threat include minimal sunk costs, equal access to technology, and free access to customers. Prices can be set by manufacturers, and the size of firms is irrelevant. Profitability and the potential for oligopolies […]
A stalled market occurs when bid and offer prices for a security are identical, eliminating the bid-ask spread. It can occur in both stock and futures markets due to high trading volume or payment delays. Stalled markets are temporary and do not indicate permanent damage or negative characteristics of the security. Investors typically focus on […]
An open market allows for the participation of a wide range of consumers and producers without legal or financial barriers. The accessibility is determined by government regulations, competition, and cultural factors. Supporters believe it benefits the economy, while critics favor restrictions to avoid instability. An open market is a type of market situation in which […]
The “samurai market” is a slang term for Japan’s financial market, including stocks and bonds. It is challenging for foreign investors as it focuses on Japanese and Asian companies. Other countries have similar slang terms for their markets. Japan’s market is large and welcomes foreign investment. Information is readily available, and brokers can assist in […]
Market value of equity is the total market value of a company’s outstanding shares, used to determine asset size and risk level. It is calculated by multiplying the current share price by the number of outstanding shares. Investors use it to make investment decisions, but it is only as accurate as the data used and […]
An imperfect market lacks relevant information for buyers and sellers, leading to delays in transactions and imperfect competition. Governments intervene to minimize blockages in information flow and improve market efficiency, but all markets are imperfect to some degree. An imperfect market is any type of inversion market where the relevant information is not available to […]
Virtual stock market services offer games and simulators to help investors learn before investing. Choosing a credible, branded service with a strong user community and useful features is important. Some services have fees for extra features, but many are free. Virtual stock markets can provide entertainment and skill-building opportunities. Those who are just starting to […]
