Equities - Undergraduate Investment Society at UCLA

S What were the first stocks?
S Where were they traded?
S Who traded them?
The First Stock Exchange
S Where and when was the first stock exchange created?
Antwerp, Belgium (1531)
How it started…
S Began as debt issuance
S The concept of equity was not yet created
S Market was made of debt
S Some finance partnerships
East India Companies
S As shipping boomed in the 1600s
S Investors put money up
S Received a share in the profits to lessen risk
S LLC’s were formed
East India
S East India companies fully established
S Profit sharing?
S First joint stock companies
S Allowed companies to demand more
S Size and royal charters meant huge profits
Coffee and stocks??
S What do coffee and stocks have in common?
S East India companies traded on paper
S No stock exchange
S How did people trade?
The South Seas Bubble
S The riches did not last long …
S The British East India Company & SSC (South Seas Company)
S Other investors wanted a slice
S No rules or regulations for issuances
S Retaking sunshine from vegetables??
S Bubble burst when SSC failed to pay dividends
The New York Stock Exchange
S Philadelphia stock exchange
S NYSE had geographically competitive advantage
S In the heart of all business and trade coming in
S Buttonwood Agreement
S Brainchild of National Association of Securities Dealers
S Does not inhabit physical space
S Increased efficiency
S Reduced bid ask spread
S Forced NYSE to evolve
Equities / Stocks
S A type of security that signifies ownership in a corporation
and represents a claim on part of the corporation’s assets or
S Ownership
S Two types:
S Common stock
S Preferred stock
S What you need to know about liquidation…
S What is liquidation
S Distribution of corporate earnings
S Given to shareholders at regular intervals
S Different forms of issuance
Dividend Yields
Share Buybacks
S A program by which a company buys back its own shares
from the marketplace
S Reduces the number of outstanding shares
S Management thinks they are undervalued
S Two options
Share Buybacks
Stock Splits
S A corporate action in which a company divides its existing
shares into multiple shares
S Always by a specific multiple
S Dollar value is unchanged
S Why?
Stock Price
S Supply and demand
S Constant revaluations
S Value
Stock Price
S Market Cap
Largest Companies by Market
$632.6 Billion
$400 Billion
$358.1 Billion
Berkshire Hathaway
$320.8 Billion
Exxon Mobil
$316.5 Billion
Bid-Ask Spread
Buy or sell: Buy
Buy or sell: Sell
Of what: EvanCo
Of what: EvanCo
How many: 1,000 shares
How many: 1,500 shares
What price: $100
What price: $125
Making the trade
S Five types of orders:
S Market Order
S Limit Order
S Day Order
S Fill or Kill
S Stop Order
Market Order
S Can be filled at the market or prevailing price
S Usually the first order to get filled
S Generally reliable
S One pitfall
Notorious Example
Limit Order
S Buy or sell a certain amount of stock at a given price or
S Buy limit order
S Sell limit order
Thank you!
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