A stock exchange is a private organization that provides the necessary facilities for its members, following the mandates of their customers, enter orders and conduct negotiations for buying and selling of securities. These include shares in companies or limited companies, public and private bonds, and a wide variety of other financial instruments.
The stock exchanges strengthen capital markets and drive economic and financial development in most countries of the world, from the creation of the first institutions of its kind created in the first seventeenth century.
The stock exchange institution attempts to satisfy three main interests. By placing shares on the Kenya stock market, companies obtain the necessary financing to meet their aims and generating wealth.
Depending on the extent of their participation, investors may benefit by way of dividends. On the other hand, the State has a means of financing and advance new developmental projects.
The trading of securities on the stock is made by members of the Exchange, brokerage firms, agents or brokers, who do their work in exchange for a commission. In many markets, other entities and individuals also have partial access to the stock market.
The stock exchange systems, to date, work by forecasting methods which allow corporations or investors to have a framework for how the market will behave in the future and thus make good portfolio decisions. These systems work on the basis of historical and mathematical data.
To list their securities on the Exchange, companies must first make public their financial statements because through them investors know the financial situation of the companies. The stock exchanges are regulated, supervised and controlled by regulatory bodies Securities Exchange Commission (SEC) (United States.
There are several types of markets: the money market, the stock market, options market, futures markets and commodity markets. They also fall into organized markets and over-the-counter markets (OTC).
Stock valuation
If a company announces that for a few years, the dividend will be reduced to finance an investment that will triple the future income in ten years, the resulting value of the share will be highly variable depending on whether one takes a low discount rate (long term vision) or strong (seeing immediate profits).
The primary responsibility of the investor is to decide on the value he considers on a given stock. When the estimated value is higher than the market price, it is worth buying.
The natural order of the investor is to ask for a purchase price limit: it requires a purchase limited to the estimated value of the share , and this order is executed at market prices, as long as the price is below the level required. With this type of order, the investor does not have to worry about the market, but only its estimate: he puts his estimate and does not care about the rest.