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Stock Market Risk Essay

4245 words - 17 pages

Stock Exchange (also called Stock Market or Share Market) is one important constituent of capital market. Stock Exchange is an organized market for the purchase and sale of industrial and financial security. It is convenient place where trading in securities is conducted in systematic manner i.e. as per certain rules and regulations.
It performs various functions and offers useful services to investors and borrowing companies. It is an investment intermediary and facilitates economic and industrial development of a country. Stock exchange is an organized market for buying and selling corporate and other securities. Here, securities are purchased and sold out as per certain ...view middle of the document...

The health of the stock market in Bangladesh now hinges on artificial life support. The recent measures taken by the government, as announced by the Finance Minister AMA Muhith to inject liquidity in the market by allowing re-investment of profits of the commercial and merchant banks earned from share trading, can not be a long-term objective. It can only be seen as a temporary measure to stabilize the market at best. After a while, the market should be allowed to operate as per the interaction of the supply and demand. This is the high time for the investors, especially the general investors, to look into the risk and return associated with the capital market.

Stock market is something where you can never foretell what is going to happen in the market. It is the place to make huge gains or incur losses when the stock market crashes. There are many factors affecting share prices. It is very hard to say just one or two factors affect the share prices. So, let us have a look at the factors that affect share prices.
Demand and supply: This is the first factor that affects share prices. When you get to see that more people are buying stocks, then there is an increase in the price of that particular stock. On the other hand, the price of stocks falls when more people are selling their stocks. So it is very difficult to predict the stock market. This is the main reason why you need to get in touch with a good stock market consultant. The consultant can help you a lot on choosing the right stocks for you.
Market cap: It is a very big mistake when you try to guess a company's worth from the price of a stock. The more important is the market capitalisation of the particular company. This helps to determine its worth. So market cap serves as an important use to determine share prices.
Earnings per share: Now when it comes to the term, "earning per share", it means the profit that a particular company has made per share and that, too, in the last quarter. To know the health of the company, then this is the most important factor. What is more is that earning per share also influences the buying tendency in the market that results in the increase of the particular stock price. This is the reason why it is very important for every public limited company to bring out the quarterly report. So to make a profitable investment, the best thing for the investors would be to keep a good watch on the quarterly reports of different companies. This is very important before you wish to invest your hard-earned money in the share market.
Impact of news: News is another factor that affects the share price. When there is positive news about a particular stock or company, people try to invest all their money in that particular stock or market. This leads to increase of investor’s interest in buying the stock. But there are many circumstances where news could also bring a negative effect where it could ruin the prospect of the...

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