Stockmarkets and Equities

Abstract

Stockmarkets around the world have undergone significant changes since the 1960s, now seeming to dominate much of the financial news headlines. The recent bull market in the USA which spectacularly came to a sudden halt with the NASDAQ falling from its all-time high of around 5,130 to around 1,350 in February 2003 has shown how shares can become spectacularly overvalued. Stock exchanges have been heavily influenced by the introduction of new technology; for instance, the stock exchanges in London, Paris and Frankfurt are now screen-based, replacing the trading-floor environment. There have also been significant regulatory changes such as London’s ‘Big Bang’ in 1986 and regulatory changes in the United States following a number of scandals during the ’bubble era’ of 1997–2000. In addition, the markets are increasingly dominated by institutional investors, pension funds, unit trusts/mutual funds, investment companies and trusts, insurance companies and the like which impose different demands than the traditional small investor. For example, in the late 1950s roughly two-thirds of shares on the UK stockmarket were owned by small investors, but by the early 2000s this figure had declined to less than one-fifth. Conversely, the ownership of shares by institutions rose from around one-fifth in the late 1950s to roughly two-thirds in the early 2000s.