SECTION IV - CHAPTER 21 - Market Instruments , Data & The Technical Analyst
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This document provides an overview of equities (stocks) including: - Equities represent ownership in a company after debts are paid off and include benefits like capital gains, dividends, and voting rights. - Common types of equities include warrants, preferred stocks, and convertible bonds. - Corporate actions like stock splits, dividends, and secondary offerings impact stock holders. - Technical analysts examine factors like price, volume, market capitalization to evaluate stocks. - Markets can be segmented by sector, company size, geography and other criteria for analysis.
SECTION IV - CHAPTER 21 - Market Instruments , Data & The Technical Analyst
- 1. Lecture No 39 Equities CMT LEVEL - I
- 2. Learning Objectives - Equities Securities - Primary Data Types - Benefits of Equities - Effect of Corporate Action on Investors - Classify Sectors , Capitalizations & Segment the markets CMT LEVEL - I
- 3. Equities • Equity is typically referred to as shareholder equity which represents the amount of money that would be returned to a company’s shareholders if all of the assets were liquidated and all of the company's debt was paid off. • We can think of equity as a degree of ownership in any asset after subtracting all debts associated with that asset. • Equity represents the shareholders’ stake in the company. • The calculation of equity is a company's total assets minus its total liabilities.
- 4. Equities •Both Equities & debt have claims on the liquidation value of a company should become bankrupt or otherwise insolvent. • Investors buy or sell stocks on formal exchange or Over the counter. • Shareholders’ Equity=Total Assets−Total Liabilities • Assets=Liabilities + Shareholder Equity
- 5. Benefits for Investors Capital Gain or Appreciation Income (Dividend) Voting Right/ Voice in Management of Company
- 6. Other Form of Equities Warrants Preferred Stocks Convertible Bonds
- 7. Warrants • A stock warrant gives the holder the right to purchase a company's stock at a specific price and at a specific date. •A stock warrant is issued directly by the company concerned; •when an investor exercises a stock warrant, the shares that fulfill the obligation are not received from another investor but directly from the company.
- 8. Preferred Stocks • Preference shares, more commonly referred to as preferred stock, are shares of a company’s stock with dividends that are paid out to shareholders before common stock dividends are issued. •If the company enters bankruptcy, preferred stock holders are entitled to be paid from company assets before common stockholders. •Most preference shares have a fixed dividend, while common stocks generally do not. •Preferred stock shareholders also typically do not hold any voting rights, but common shareholders usually do.
- 9. Convertible Bonds • A convertible bond pays fixed-income interest payments, but can be converted into a predetermined number of common stock shares. •The conversion from the bond to stock happens at specific times during the bond's life and is usually at the discretion of the bondholder. •A convertible bond offers investors a type of hybrid security that has features of a bond, such as interest payments, while also having the option to own the underlying stock.
- 10. What Does A Technical Analyst Needs? Price Volume Ask/Bid Size Time 52 Week High/Low Market Capitalization
- 11. What Does A Technical Analyst Needs? • Price – Open , High , Low & Close refer to those actual traded price for any given time interval • Volume – No. of Shares changing hands in a specific trade or summed over an interval. • Bid/Ask – Current price buyer willing to pay & seller are willing to accept . • Size – No. of Shares the maker of a bid or ask will trade. • Time – The time trade tookplace.
- 12. What Does A Technical Analyst Needs? • 52 week High/Low – The highest /Lowest traded over the past year. • Market Capitalization – Value of all publicly available shares of a stock in a company. It is the product of price multiplied by the no. of shares outstanding .
- 14. Ex Dividends • Ex – Dividends - Ex-dividend describes a stock that is trading without the value of the next dividend payment. •The ex-dividend date or "ex-date" is the day the stock starts trading without the value of its next dividend payment. •A buyer who purchases a stock on or after its ex- dividend date is not entitled to the declared dividend – it is owned by whoever owned the stock the day before the ex-dividend date.
- 15. Stocks Splits •A stock split is a corporate action in which a company divides its existing shares into multiple shares to boost the liquidity of the shares. •Although the number of shares outstanding increases by a specific multiple, the total dollar value of the shares remains the same compared to pre-split amounts, because the split does not add any real value. •The most common split ratios are 2-for-1 or 3-for-1, which means that the stockholder will have two or three shares, respectively, for every share held earlier.
- 16. Secondary Offerings •A stock split is a corporate action in which a company divides its existing shares into multiple shares to boost the liquidity of the shares. •Although the number of shares outstanding increases by a specific multiple, the total dollar value of the shares remains the same compared to pre-split amounts, because the split does not add any real value. •The most common split ratios are 2-for-1 or 3-for-1, which means that the stockholder will have two or three shares, respectively, for every share held earlier.
- 17. Restricted Shares • Restricted shares and stock options are both forms of equity compensation that are awarded to employees. • Restricted shares represent actual ownership of stock but come with conditions on the timing of their sale. • They are most common in established companies that want to motivate employees by giving them an equity stake. • when restricted shares are given to an employee, it is on condition that the employee will continue working at the company for a number of years . • This might be an earnings goal or another financial target. • Such shares are often granted in stages, each with its own vesting date or milestone attached.
- 18. Segment the Markets for Analysis • Research said that the price performance of individual stocks depends heavily on the performance of its sector. Sectors & Industries Banks , Oil & Gas , Pharma , Telecom , FMCG Etc. Capitalization Large , Medium , Small & Micro Geography Country , S& P 500 , Nifty , Kospi , DAX , NASDAQ Others Growth , Value , Defensive & Aggressive .