Equity Markets, Valuation, and Analysis

CHAPTER 1Equity Markets, Valuation, and Analysis: An Overview

H. Kent Baker

University Professor of Finance, Kogod School of Business, American University

Greg Filbeck

Director and Samuel P. Black III Professor of Finance and Risk Management, Black School of Business, Penn State Behrend

Halil Kiymaz

Bank of America Professor of Finance, Crummer Graduate School of Business, Rollins College

INTRODUCTION

The earliest activity resembling a stock market system took place in the late thirteenth century in Antwerp, which served as the commercial center of Belgium. The history of equity markets dates back to the early seventeenth century with the launch of the Amsterdam Exchange. In 1602, the Dutch East India Company (VOC) became the first company to continuously trade. Although the creation of the London Stock Exchange (LSE) was in 1801, restrictions on companies issuing shares in Britain did not occur until 1825, which limited the effectiveness of the LSE. The New York Stock Exchange (NYSE) was formed in 1817 and quickly became the center of U.S. trade. Electronic trading debuted in 1971 with the creation of the NASDAQ market.

World equity markets have grown steadily since the 1980s. For example, world market capitalization of listed companies reached $79.121 trillion in 2017 from a low of $2.501 trillion in 1980 (World Bank 2018). During this period, it fluctuated dramatically, declining almost 50 percent during the global financial crisis of 2007–2008. Among the world stock exchanges, ...