Stocks can be categorized in various ways. One common way is by the country where the company is domiciled. For example, Nestle and Novartis are domiciled in Switzerland, so they may be considered as part of the Swiss stock market, although their stock may also be traded at exchanges in other countries.

At the close of 2012, the size of the world stock market (total market capitalisation) was about US$55 trillion.By country, the largest market was the United States (about 34%), followed by Japan (about 6%) and the United Kingdom (about 6%). This went up more in 2013.

1. Mean
2. Median
3. Average
4. Standard Deviation
5. z-scores
6. p-value
   

The Brownian motion model for financial markets concerned with defining the concepts of financial assets and markets, portfolios, gains and wealth in terms of continuous-time stochastic process. Under this model, these assets have continuous prices evolving continuously in time and are driven by Brownian motion processes. This model requires an assumption of perfectly divisible assets and a frictionless market i.e. that no transaction costs occur either for buying or selling. Another assumption is that asset prices have no jumps, that is there are no surprises in the market.

Let’s use the example of a recently volatile stock known as E-Trade Financial (ETFC). The stock price experienced a large sell off and dropped to $8.59 per share, a 58.7% drop. The next day a rally occurred in the stock market and E-Trade’s stock soared up 40.9%. This left the stock at $5.00 at the end of the day. This is a key example of how the percentage mathematics used in stock prices can easily be misleading to casual investors.

Now let’s break down this problem in simpler terms. Suppose you bought XYZ stock at $10 per share. It remains around $10 per share and suddenly it falls 80% one day due to a sell off and ends the day at a meager $2 per share. The next day, the aggregate stock market sentiment is the stock was oversold, so a rally occurs and the stock soars up 50%. If you were a long term investor during all this madness, you’d still be down significantly. A 50% rally in a $2 per share stock will only result in a $3 stock price. Which means despite the face value of 80%-50%=30%, you are actually down 70% on your investment of XYZ stock because the price per share ultimately went from $10 to $3.

For investing in companies that can deliver extraordinary long term investment returns what one needs to understand is how profitable a company is, what the company does with that profit andhow a simple GCSE maths trick work wonders

This simple profitability measure (that stock market websites so rarely seem to print) is the single most important ratio for finding huge wealth generating stocks. Why? The reason lies in what happens to the profit once its generated.

This is the kind of business that Warren Buffett in his understated manner would say had 'good economics' and that's why it pays to play the stock market only in high ROE shares. You just can't get these kind of astonishing compounding returns in any low ROE business.

How do these traders and firms predict which shares will hit big? How do they know when to sell?

The truth is there is no magical way to predict the stock market. Many issues affect rises and falls in share prices, whether gradual changes or sharp spikes. The best way to understand how the market fluctuates is to study trends.

In this article we will discuss stock market trends, which help investors identify what stocks to buy and when. Keeping track of upswings and downswings over the history of individual stocks, as well as being aware of market-wide trends, helps investors plan buying and selling.

Many­ factors affect prices in the stock market, including inflation, interest rates, energy prices, oil prices and international issues, such as war, crime, fraud and political unrest.

Sudden rises or drops in stock prices are often called spikes. Spikes are extremely difficult, if not impossible, to predict. Stock market trends are like the behavior of a person. After you study how a person reacts to different situations, you can make predictions about how that person will react to an event. Similarly, recognizing a trend in the stock market or in an individual stock will enable you to choose the best times to buy and sell.

Source:

[1] Leung, M., Daouk, H. and Chen, A. (2000) Forecasting Stock Indices: A Comparison of Classification and Level Estimation Models. International Journal of Forecasting, 16, 173-190. http://dx.doi.org/10.1016/S0169-2070(99)00048-5 [2] Maberly, E.D. (1986) The Informational Content of the Interday Price Change with Respect to Stock Index. Journal of M. E. Sonono, H. P. Mashele 191 Futures Markets, 6, 385-395. http://dx.doi.org/10.1002/fut.3990060304 [3] Wu, Y. and Zhang, H. (1997) Forward Premiums as Unbiased Predictors of Future Currency Depreciation: A NonParametric Analysis. Journal of International Money and Finance, 16, 609-623. http://dx.doi.org/10.1016/S0261-5606(97)00022-3

[4] Aggarwal, R. and Demaskey, A. (1997) Using Derivatives in Major Currencies for Cross-Hedging Currency Risks in Asian Emerging Markets. Journal of Future Markets, 17, 781-796.

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For example, the stock market crash of 1987, didn’t cause any lasting economic damage. (though it did influence monetary policy. UK cut interest rates in fear the stock market crash would cause a recession. Instead, low interest rates caused a boom.

Plummeting share prices can make headline news. But, how much should we worry when share prices fall? How does it impact on the average consumer? and how does it affect the economy?