Book Value: The Chanllenges of Investing in The Stock Market

The real GDP is the market value of all goods and services produced in a nation during a specific time period. Real GDP measures a society 's wealth by indicating how fast profits may grow and the expected return on capital (American Association of Individual Investors, n.d.). Firms use this information to identify opportunities of investment and growth (Thompson, 2011). Because Apple is an industry giant, it needs to look for opportunities to constantly improve and grow in order to maintain its loyal customer base. The real GDO report will provide the firm with an overall understanding of the country’s economic health.

In order to succeed in any business, it is extremely important to understand the stock market. In this assignment we were asked to follow the stock market continuously for four months and understand the market. The stock market is a global marketplace, where goods and services are traded in the form of equities.

• The rise and fall of GDP over a specific period of time is, in many cases, the number one indicator for how the economy is doing. Being the output of final goods and services, GDP works well with consumer confidence and provides a good idea as to the general health of the economy. By looking at Figure 1, we can see that GDP rose steeply after the 20008-2009 recession and has continued to remain strong with relatively little movement since 2010. In the most recent quarters, 2014 and 2015, GDP has declined a little, but the decline is in no way too drastic nor did it have any significant impact on the economy. This slight decline is more like GDP

GDP is not only an important indicator to a country's economy growth but also to social and politic perspectives. GDP reflects unemployment rate, inflation and interest rate. The Federal Reserve has continuously raised the interest rate at .25 point for more than 10 successive times in other to attract more and more investment. Government spending, as a part of GDP, has also increased from year to year. As a year passes, economists, firms and governments look at GDP as an indicator for the following year's economic policy in order to keep the economy go in a right track. GDP is also an indicator of recession, when an economy experiences two successive declines in GDP, the economy is going through recession.

The stock market heavily influences the strength of an economy. The new president’s plans for the American economy have prompted investors to start buying and investing again. According to USA Today, the “Trump Rally” was what put the Dow Jones average back on track.

Many changes have transcribed in the global market since the years of 2008-2009, the years of what could be dubbed as the “Second Great Depression”. The changes made have been of significant impact as the market has had to accommodate or regulate a great quantity of systems that range from the advancement of technological platforms in the compartment of information technology to the increase in demand of less common forms of energy being established by major corporations such as Tesla’s Powerwall home batteries. The increase of applications via phones have even made it easy for investors, even novice investors, to buy shares in stock markets at an international scale with a push of a button, taking great advantage of what the globe offers in

The US economy is made up of approximately 2/3 (68.7% to be exact) by consumer spending. Therefore, any significant change in GDP usually has a substantial effect on the stock market. When an economy is healthy and expanding, it is anticipated that businesses will report better earnings and growth. This will create a positive effect for the US stock markets in a bullish manner. At the same time, lower GDP measurements can have the opposite effect on stock prices as businesses begin to suffer. This lower GDP will have a negative effect on the US stock market in a bearish manner.

One of the biggest variable that lowers the GDP is Inflation. CBO expects the prices to “rise at a modest pace over the next few years” (CBO 2017). With a modest pace of inflation, the economy shows signs of growth, but at a slow pace. This will change as “higher oil prices put upward pressure of prices for goods and services” (CBO 2017). This pressure will affect the dollar value which will raise the GDP even more. The CBO projects a 1.9 percent increase of inflation in 2017 and 2 percent increase in 2018 and continue at 2 percent for the coming

This document is authorized for use only by Yen Ting Chen in FInancial Markets and Institutions taught by Nawal Ahmed Boston University from September 2014 to December 2014.

The term “GDP” the Gross Domestic Product which is the total value of goods produced and services provided in a country during one year, and the “GNP” is Gross National Product is the market value of all the products and services produced in one year by labor and property supplied by the residents of a country, these two things go hand and hand because they affect our economy and the fluctuations of our economic activities that happen over a period of time which is a Business Cycle. How does this affect you? Depending on our countries state, we could be in an expansion which is good because that’d mean our economy is growing, peak meaning our economy is at a high point , recession which is a decline in the economy, a trough meaning it’s at the bottom or recovering meaning it’s getting better. If the economy is in a recession there would be high unemployment and low GDP and GNP means for some little to no income or it could help if the stage of our economy is growing or expanding leading to more job opportunities, more revenue for the GDP and GNP overall resulting in a stable strong economy.

With the arising of the capital market in the United Kingdom in the 18th century, the stock market becomes an essential approach for investors to invest. The price of stock fluctuating enormously, there are usually two kinds of invest in the stock market: long-run invest and short –run invest. In order to conduct a long-time invest more rationally, information about the company such as its operating situation, financial situation are required to judge if it is worthwhile to invest. As for short-time investment, stock prices are more dynamic and susceptible to quick change. There exist more unpredicted factors such as other investors’ behavior on this stock, the influence of social media, the social influence and etc. Markov Chain is a stochastic model describing a sequence of possible events in which the probability of each event depends only on the state attained in the previous event (Markov Chain, n.d.). The Fluctuation of Stock Price can be regarded as Markov Process (Vasanthi, 2011), there are a lot of researches in this field and the prediction model had already well established. According to the situation of different countries these models are adjusted when applied in different countries and different market.

When the economy expands, most industries and companies benefit and grow with it and the reverse is true, that is why it is important for analysts or even individual investors to keep an eye on the economy to determine when it is going to be beneficial for them to invest their money. The economic environment indicators assist these investors in determining the state of the economy. In this paper, I will describe the methods used to assess the macroeconomic environment, discuss the value of financial ratio analysis in the context of common stock investing and compare intrinsic value and market price.

The stock market is one of the leading influences on price setting and trade markets. It can have both positive and negative effects on prices and movement in trade both domestically and internationally. The United States stock market has had a long history of influence not only on our economy, but also on a global scale. Currently, the stock market has been slight downturn, due to falling oil prices and agricultural commodities. Which allows for cheaper products for the consumers. It is clear to see that the stock market has and will continue to influence how the average person goes about their day to day life.

Investing in emerging markets offer tempting advantages to investors. The volatile economies of countries considered to be in this category have a potential for extraordinary returns. A caveat to investors considering opportunities in emerging markets are the presence of unstable governments, the chance of nationalization, poor property rights protection, and large swings in prices. Emerging markets are far from a sure thing. But, despite high individual risk, emerging markets can reduce portfolio risk. The volatile economies of these countries have such low correlations compared to the domestic market that they actually provide the greatest degree of diversification.

The purpose of this composition is to supply, in a form suitable for laymen, guidance in developing a better understanding of the meaning behind financial market anomaly and its implications on the established assumption that markets are rational. It is vital for an investment bank client to be aware of the large amount of controversial evidence challenging traditional hypotheses of asset-pricing bahaviour and, primarily, to become sensitive to investment strategies predicting likely abnormal returns. In order to participate intelligently in the equity market, one should, in any case, be forearmed with an adequate knowledge of how one recognized and persistent financial market anomaly has evolved over time and influences