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THE BASICS OF SECURITIES MARKETS - Coggle Diagram
THE BASICS OF SECURITIES MARKETS
Stock Term
Price
Cost of buying one share of stocjk
Market Cap
Market Capitalization
Price x No. of Shares outstanding
$20 x 1 million shares = 20 million dollars
Total value of all of the stock that is available
Value of equity
Dividend
A shared of profit that paid out to shareholder
Example
1 million of profit
Standard Deviation or Volatility (ความผันผวน)
How much stock's price fluctuates over time
เทรดช่วงที่ความผันผวนเยอะ ราคาแกว่งกว่า ไม่เสียเวลานั่งรอราคาขึ้นลง
วัดได้ 2 วิธี
Average True Range
ATR(14)
Standard Deviation
StdDEV(20)
Price-to-earning ratio (PE Ratio)
Stock Price in the market divide profit earning
Example
Price per share $20 / Profit $2
PE ratio = $10
10 times
Price-to-book ratio (PB Ratio)
the book value from an accounting point of view
$20/$5
4 times
$4
Stock Market
The number of firm has been shrinked since 1990s
Market Efficiency
Greater Market Efficiency
Stock already incorporates all known information into its price
No stocks are undervalued and no stocks that are overvalued
All of the points are faired
Disappearing Alpha
Average actual return has fallen
Alpha actually negative
Basics of Trading Stocks
Stock that trade in USA
NYSE
NASDAQ
AMEX
Derivitives
ETFs
Exchange traded funds
Group of stocks trading on exchange under a ticker symbol
EXAMPLE: SPY
Bid and Ask
Bid
someone is willing to pay
Ask
most someone will sell for
Bid-ask spread
the bigger the wider the spread is, the less trading go on
Ask minus bid
Market orders
Buying or selling stocks involving placing orders
Market orders involve buying a stock at the best available price
Order routed by price and times
Limit orders
Willing to buy a stock XYZ at a price no higher than $100
More than $100, otherwise not go through
Algorithm Trading
More than 90% of orders by some metrics and estimates
Human design whether that program makes sense or selling the stock
Algo trading comes in 2 flavors
Market Making
capitalize on bid-ask space
high frequency traders
Data Mining
Involved trading on patterns in data
stock price
outside information
Correlations
stock price
Data points
Algorithms in Excel
Column
Open
High
Highest price that stock trade on that particular day
Low
Lowest price that stock trade on that particular day
Adj Close
The close after taking into account any dividends that are paid out
ถ้ามีการจ่ายปันผล $1 ในวันนั้น ราคาปิดจะถูกลดลงไป $1 เหมือนกัน
Example
Renaissance Technologies (EnTech)
We can then buy or sell based on data about weather forecasts
Correlations between stock price and weather are too low
Stocks and FED
FED sets interest rates in the economy
Capitalize on FED's movement
Taylor Rule and FED interference
Taylor Rule
define the fair level of interest rate
Tell appropriate level of rates are in the economy
FED set the interest rate too high than the Taylor Rule said
Red Line
Residual = FED rate minus the Taylor Rules
Yellow Line
S&P500 Annual Returns
The relationship between FED and Stock market is not perfect
FED doesn't directly control the stock market
But there's a relationship here
Big Data in Finance
2 ways of making investment decisions
intuition
Data
HiPPO Problem
HiPPO
Highest paid person's opinion
Big Data Projects Steps
Gather and clean data
Analyze data
Test choices with data
Make a decision
Regression Analysis
Regression: y=ax+b
x = set of data that we got
b=based value
a = coeficcient
