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Chapter 19 – Int’l Stock Markets

Chapter 19 – Int’l Stock Markets. Globalization and Trading Overseas Multiple Listings U.S. Stocks on Foreign Exchanges Foreign Stocks on U.S. Exchanges American Depository Receipts (ADRs) International Depository Receipts (IDRs) Diversification and Foreign Stocks Correlation Coefficients

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Chapter 19 – Int’l Stock Markets

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  1. Chapter 19 – Int’l Stock Markets • Globalization and Trading Overseas • Multiple Listings • U.S. Stocks on Foreign Exchanges • Foreign Stocks on U.S. Exchanges • American Depository Receipts (ADRs) • International Depository Receipts (IDRs) • Diversification and Foreign Stocks • Correlation Coefficients • Diagram of -1, 0, +1 Correlations between two risky assets

  2. Chapter 19 – Int’l Stock Markets • International Exchanges • United Kingdom (England) • London – LSE • Regionals Consolidated in 1980s • Dublin Stock Exchange started in 1995 • FTSE (Footsie) 100 – Major Stock Index • Germany • Major Stock Exchange – Frankfurt (FSE) • Seven Independent Regionals • Bank controlled – buying and selling is a bank transaction

  3. Chapter 19 – Int’l Stock Markets • European Developments • The central idea • Pan-Europe (One market for all of Europe) • Trading on many floors with one system • The hang-up • Ownership • Regulations on Trading • Electronic Trading System • Connections to the U.S. Markets • Nasdaq and NYSE

  4. Chapter 19 – Int’l Stock Markets • International Exchanges • Japan • Tokyo Exchange (TSE) • Six Locations – Tokyo, Osaka, Nagoya, Kyoto, Fukuoka, and Sapporo • Zaraba Method – Saitori Members • China • Still Rudimentary • Government Controlled • A-Market and B-Market

  5. Chapter 19 – Int’l Stock Markets • Exchange Characteristics • Ownership • Private to Government • Trading Agents • Broker/Dealer to Government Controlled • Trading Procedures • Continuous or Call, Electronic or Out-Cry • Regulations • Self-Regulating Organizations to Government Controlled

  6. Chapter 19 – Int’l Stock Markets • Global Depository Receipts - GDRs • Shares issued by a financial institution (bank) • Share value based on the underlying security of a firm in a foreign country • Shares meet local government regulations • “Mutual Fund” type trading • Shares issued receive “dividend” pass-throughs • Shares information is pass-through via disclosures in original country reports to local country language • ADRs – American Depository Receipts • Shares Trading on U.S. Exchanges

  7. Chapter 19 – Int’l Stock Markets • Indexes of Performance • Some Daily Measure of the General Performance of Stocks • Different Mechanics • Different Stocks • Different Weights • Movement to “Free-Float” • Shares that are available for public trading • Target date is June 2002

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