Financial Markets And The Global Economy

| The hypothesis that market prices reflect all publicly available information is called efficiency in the:Answer

The United States stock market has experienced many interesting events this year, testing the nerves of millions of people around the world. The market started the year with the worst two-week performance in its history, creating a lot of uncertainty for the year to come. A severe decline in oil prices caused many firms within the energy industry to suffer. However, despite these negative events, gold saw its best quarter in 30 years, the market had a large reversal, and oil has been recovering. These volatile movements provided an amazing opportunity to make money for investors, relief for those who had holdings during this time, and a better outlook for firms. Two firms that have had an interesting year so far are ExxonMobil Corp. and Apple Inc. Exxon has experienced the effects of macroeconomic variables, while Apple has had some internal issues that lead to some stock price fluctuations.

Recent events have merely confirmed what economists have known for some time, namely, that the interconnectedness of global economic activity renders macro-management by single governments redundant. Their function is now to regulate markets to ensure economically efficient solutions.

This accessibility of information and deregulation has encouraged foreign investments, and we can see the surge of new financial products and an increase in financial innovation in the markets today. Stocks can now be dual-listed, traded across markets in two different countries. For example, many large Canadian companies are listed both on the New York Stock Exchange as well as the Toronto Stock Exchange. There are also Brazilian-based companies listed on both the Brazilian and US stock markets. This adds greater liquidity to the companies’ shares traded, and also gives investors more options as to where they can trade.

The current interest rate environment should be conducive to high levels of investment in the private sector. But that is not the case. Interest rates (1 year Treasury fell below one percent during the Q4 2008 to 0.49 percent. (See FRED) Since 2008 interest rates have remained below one percent—despite occasional rumblings by chairperson Janet Yellen promising higher rates. While low rates favored business that can borrow cheap money to meet their investment needs, they obviously hurt people who derive their income from interest earning assets. The expectation that low interest rates would increase investment have been frustrated because investment and income have been rising, the increases have not be as robust as might be expected. And it is possible interest rates have been so low they have no effect on

The two most important financial markets in the U.S. economy are the bond market and stock markets (Ireland, 2013). A bond is a certificate of indebtedness that explains the borrower’s obligation to the individual that hold the bond. It specifies the date the loan is to be repaid and the interest rate that will be paid until the loan matures. A stock market is a claim of partial ownership in a firm and therefore a share of the profits that the firm makes. The firms pay a portion of their profits as dividends to its stockholders (Ireland, 2013).

Stock markets are a central component to the functioning of a capitalist economy. All major economies have national stock markets and many economies have smaller markets as well in order to facilitate trade in small cap stocks, or other specialized securities such as derivatives. Sometimes the performance of a stock market is used in the media as a measure of economic performance, as the market is deemed to be comprised of rational economic actors whose actions are guided by high levels of knowledge. It is important for everybody to understand how stock markets work, and what the benefits and limitations are of using stock markets as a gauge of economic performance.

In 2008, the global financial industry experienced dramatic changes when the global financial crisis came furiously. In the United States, the historical changes appeared in the structure of investment banking. These changes included the fifth-largest US investment bank, Bear Stearns and the third-largest US investment bank, Merrill Lynch was acquired respectively, and the fourth-largest US investment bank, Lehman Brothers declared bankruptcy. In addition, the Goldman Sachs and the Morgan Stanley had no choice but to transform separately into the bank holding company. Moreover, the American government took over the Fannie Mae and the Freddie Mac and held a major share in the American International Group. There were also various events about the bankruptcy and merger of the other financial institutions. In the wider world, some banks in Belgium, Britain, Switzerland and Germany also got into the dilemmas and troubles, and these banks accepted the government aids without choices.

The foreign exchange market (also known as Forex or Fx market) is the market speculator in the world's largest with more than $ a fifty trillion changing hands each date.

Companies are facing a highly uncertain environment due to financial-crisis and global economy. Regardless high-competitiveness markets, organizations foresee as a priority become an intelligent enterprise leveraging people, process, data and technology through establishing strategic plans. The strategic planning is a complex process of collectivity efforts between executives, middle managers and employees. Organizations endure several factors during this practice depending of the maturity life cycle, complexity, sector and clear definition of the future stage.

The Flow of Fund- the financial system allows the flow of funds from surplus spending units (SSU’s) to deficit spending units (DSU’s). Providers of funds (SSU) receive a financial instrument (which stipulates the terms of the deal – i.e. amount lent, stream of future income, maturity date, etc.) issued either by the receiver of the funds (DSU) or by a financial intermediary.

The spot FX market is unique within the world markets. It’s like a Super Wal-Mart where the market is open 24-hours a day. At any time, somewhere around the world a financial center is open for business, and banks and other institutions exchange currencies every hour of the day and night with generally only minor gaps on the weekend.

I noticed that the filled seller and buyer market could have a direct relation with the fluctuating prices of the currencies. There was no significant fluctuation in price for about two hours, after which the buyer market was filled. The filled buyer and seller market demonstrated that there are lot of traders who are trading in foreign exchange currency especially in the beginning of the month. I would like to mention here that my highest profit was in the transaction that incurred right after the buyer market was filled on first day of my trade.

Any time someone travels to a foreign country, chances are they needed to exchange their money, and in doing so, participated in ForEx trading. For many first time traders the Foreign Exchange market can seem very confusing. ForEx is short for Foreign Exchange, it is the market in which people can exchange currencies from all over the world (Peters, J. 2012). When someone trades on the foreign exchange market, they are buying once currency and selling another. Buying and selling occurs at the same time in the ForEx market, which is why currencies are always quoted in pairs (Peters, J. 2012). Various factors such as economics and geopolitics cause exchange rates to fluctuate, so currencies rise and fall against each

As the leading financial market in the world, the Foreign Exchange Market consists of several types of financial institutions, such as, investors, such as, central banks, brokers, and investment firms. The Foreign Exchange Market does not have an actual physical location; it is a worldwide system of computers. Currency traders are linked together from all over the world by these computers. Once currency traders enter the network, the computers allow them to exchange currencies by purchasing, selling, or speculating ("Foreign Exchange Markets - Forex - Investopedia Definition | Investopedia," n.d.). In the Foreign Exchange Market, also called Forex Market, trillions of transactions are completed everyday. Within this market are the spot market and forward market. Spot transactions take place in the spot market. A spot transaction occurs when one currency is traded for another currency. These types of transactions are immediate, however it takes two business days for the bank to process this transaction due to different time zones (Standard Bank, n.d.). Forward transactions occur in the forward market and are often called foreign exchange contracts. Unlike spot transactions, forward market transactions are set to occur on a specified future date. The agreement and exchange rate of the transaction is already determined, however, it will be traded at a future date, which is noted in the contract (Standard Bank, n.d.). Many historical