3. Stock market quotations : Euronext vs Nasdaq 3.1 ...storage.canalblog.com/21/24/366275/68715926.pdf3.5. Nasdaq stock market quotations 3.5.1. Nasdaq segments (Dec. 2010) 30/09/2011

3. Stock market quotations : Euronext vs Nasdaq

3.1. Euronext Paris main quotation rules

30/09/2011 Pr. Didier Folus

Liquid shares Illiquid shares

Pre-opening at 7:15 am

Opening fixing at 9:00 am

Continuous quotation 9:00 am -5:30 pm

Closing auction at 5:35 pm

Pre-opening at 7:15 am

Fixing at10:30 am

Fixing at 4:00 pm

Danone

Ordinary stock

Compartment A (large caps)

Continuous

1

30/09/2011 Pr. Didier Folus 2

Danone intraday quotes on February 22, 2011


3.2. Euronext central orderbook fixing

• Pre-opening from 7:15 to 9:00 am

• Opening : XYZ stock

Buy side Sell side

Quantity Limit EUR Limit EUR Quantity

400

200

250

500

850

no limit

25

24

23

22

no limit

23

24

25

26

500

250

400

400

600


Quotation (electronic) rules :

• 850 executed orders at 24 EUR

• 300 non executed sales on the 24 EUR-limit

• 15’ market interruption if quote varies 10 %

Price Quantities Cumul Max

limits purchases sales supply demand min (S,D)

no lim.

22 EUR

23 EUR

24 EUR

25 EUR

26 EUR

no lim.

-

850

500

250

200

0

400

500

0

250

400

400

600

-

0

750

1 150

1 550

2 150

2 200

1 350

850

600

0

0

750

850

600

0


3.3. Euronext continuous time quotation

• It’s now 2:20 pm

• A 100 stock 25.20 EUR limited buying order comes

Purchases Sales Last trades

Quantity Limit Limit Quantity Time Quantity Quote

40

10

30

10

20

25.05

25.00

24.95

24.90

24.85

25.10

25.15

25.20

25.25

25.30

10

30

30

20

40

2:19 pm

2:19 pm

2:17 pm

2:16 pm

2:15 pm

50

150

30

10

30

25.10

25.05

25.00

24.90

24.85


Continuous time quotation (continuing)

• Matching orders



100

40

10

30

10

25.20

25.05

25.00

24.95

24.90

25.10

25.15

25.20

25.25

25.30

10

30

30

20

40

2:19 pm

2:19 pm

2:17 pm

2:16 pm

2:15 pm

50

150

30

10

30

25.10

25.05

25.00

24.90

24.85


Continuous time quotation (end)

• Average price for 70 stocks : 25.16 EUR

• Last quote : 25.20 EUR

• Last fluct. : + 0.40 %



30

40

10

30

10

25.20

25.05

25.00

24.95

24.90

25.25

25.30

20

40

2:20 pm

2:20 pm

2:20 pm

2:19 pm

2:19 pm

30

30

10

50

150

25.20

25.15

25.10

25.10

25.05

3.4. Index calculation : CAC 40 example

• Security selection :

– 100 first floating capitalization : Qi,t × Fi,t × Pi,t

– 40 most liquid : volume, turnover…

• Index formula :

• Index uses : diversification, benchmarking, hedging


40

1

87.12.31,87.12.31,

40

1

,,,,

000140

i

iit

i

titititi

t

PQk

fPFQ

CAC

Capping factor

at 15 %

Adjustment coefficient

on Sep 27, 2011 : 0,496658605173

Danone floating cap., Sep 27, 2011 = 648,861,000 × 0.85 × 46.225 = EUR 25.49 bn

EUR 370,437,433,957.70


3.5. Nasdaq stock market quotations

3.5.1. Nasdaq segments (Dec. 2010)


Stocks Indexes Related segments

NG

S

Co

mp

osi

te

Na

sda

q 1

00

FT

SE

Na

sda

q 5

00

Na

sda

q C

om

po

site

Nasdaq

Options Market

Nasdaq

Portal Market

Nasdaq

ETF Market

Global Select

Market

(# 900 companies)

Global Market

(# 1 400 companies)

NC

M

Co

mp

osi

te

Capital Market

(# 500 companies)

NS

M

Co

mp

osi

te

• In 1971, the National Association of Securities Dealers

created the NASD Automated Quotations – NASDAQ

• Registered

with the SEC

since 2006


3.5.2. Nasdaq structure of competing MM

• Each market maker competes for customer order flow by

displaying buy & sell quotations for a guaranteed number

of shares

• Example of a Level II screen :

Microsoft Corp. (MSFT) / February 20, 2009 / 3:30 pm EST (USD)

Best bid : 18.10 Inside spread : 0.10 Best ask : 18.20

MMID Bid price Size Time MMID Size Ask price Time

SBSH

PERT

UBSW

FBCO

REDI

NATY

GSCO

18.10

18.05

18.05

17.99

17.95

17.91

17.91

5,000

2,500

2,500

7,500

800

5,000

2,500

15:29:50

15:30:00

15:28:45

15:27:59

15:29:20

15:30:00

15:28:28

UBSW

GSCO

NATY

FBCO

REDI

PERT

SBSH

7,500

2,500

700

5,000

5,000

2,500

2,500

18.20

18.25

18.25

18.25

18.37

18.30

18.32

15:29:55

15:29:00

15:29:45

15:27:59

15:29:20

15:28:59

15:28:40

4. Stock pricing & analysis

4.1. Fundamental analysis

• Industrial economy :

– pure and perfect competition zero profit

– imperfections positive profit

• Competitivity = ability to sell goods with profit :

– using best inputs, technologies, « know-how »…

– using a mono/duopolistic position

• Strategy :

– objective : value creation

– choice : market share, internal/external growth, etc.


http://www.google.fr/imgres?imgurl=http://www.securiteaerienne.com/ill/Boeing-logo-bl-xz.gif&imgrefurl=http://www.securiteaerienne.com/taxonomy/term/25&usg=__v7SnDIl7f7CHwUzOiaqVCG7yG64=&h=178&w=702&sz=7&hl=fr&start=1&zoom=1&um=1&itbs=1&tbnid=IMnc_OLgljGJ5M:&tbnh=35&tbnw=140&prev=/images%3Fq%3Dboeing%2Blogo%26um%3D1%26hl%3Dfr%26sa%3DX%26rlz%3D1T4ADBF_frFR318FR325%26tbs%3Disch:1

http://www.google.fr/imgres?imgurl=http://socket.imag.fr/Images/Partners/Airbus_Logo_150x100.jpg&imgrefurl=http://socket.imag.fr/partners-fr.htm&usg=__SQfR9VjCbHzbRqBo0lnVu3kGe74=&h=100&w=150&sz=23&hl=fr&start=11&zoom=1&um=1&itbs=1&tbnid=SZgEFwnbDcdIkM:&tbnh=64&tbnw=96&prev=/images%3Fq%3Dairbus%2Blogo%26um%3D1%26hl%3Dfr%26sa%3DX%26rlz%3D1T4ADBF_frFR318FR325%26tbs%3Disch:1

http://www.google.fr/imgres?imgurl=http://www3.sympatico.ca/jdaneau/monde/images/embraer_logo_padrao_azul.jpg&imgrefurl=http://www3.sympatico.ca/jdaneau/monde/richesse.html&usg=__6IVWVj2ssQhskXQkdko4T2k2WxU=&h=248&w=1003&sz=75&hl=fr&start=1&zoom=1&um=1&itbs=1&tbnid=zyQtJDonmRBANM:&tbnh=37&tbnw=149&prev=/images%3Fq%3Dembraer%2Blogo%26um%3D1%26hl%3Dfr%26sa%3DX%26rlz%3D1T4ADBF_frFR318FR325%26tbs%3Disch:1

http://www.google.fr/imgres?imgurl=http://www.investlisburn.com/filestore/images/Bombardier-logo.jpg&imgrefurl=http://www.investlisburn.com/about_lisburn/lisburn_an_investor_perspective/&usg=__Jxtw5ozqgNCCXHt4J3GbdU6q3n4=&h=117&w=496&sz=9&hl=fr&start=5&zoom=1&um=1&itbs=1&tbnid=EkAfp-5_ExzxhM:&tbnh=31&tbnw=130&prev=/images%3Fq%3Dbombardier%2Blogo%26um%3D1%26hl%3Dfr%26sa%3DX%26rlz%3D1T4ADBF_frFR318FR325%26tbs%3Disch:1

http://www.google.fr/imgres?imgurl=http://www.oktal.fr/Upload/Logo/Sukhoi.jpg&imgrefurl=http://www.oktal.fr/index.php%3FPage%3DLastRefAero%26Lang%3Dfr&usg=__htV6_O6rB4T0Thnl_R0TYt589l8=&h=42&w=130&sz=5&hl=fr&start=10&zoom=1&um=1&itbs=1&tbnid=U18PFuBf8n5PaM:&tbnh=29&tbnw=91&prev=/images%3Fq%3Dsukhoi%2Blogo%26um%3D1%26hl%3Dfr%26sa%3DX%26rlz%3D1T4ADBF_frFR318FR325%26tbs%3Disch:1

http://www.google.fr/imgres?imgurl=http://www.parchim-airport.com/en/img/logo_antonov.jpg&imgrefurl=http://www.parchim-airport.com/en/html/intro.asp%3Fid%3D5&usg=__4kOB4UuPf2IvkJ_fKxpFkB_4kD0=&h=86&w=206&sz=15&hl=fr&start=16&zoom=1&um=1&itbs=1&tbnid=4O7kdc4A9t09RM:&tbnh=44&tbnw=105&prev=/images%3Fq%3Dantonov%2Blogo%26um%3D1%26hl%3Dfr%26sa%3DX%26rlz%3D1T4ADBF_frFR318FR325%26tbs%3Disch:1

http://upload.wikimedia.org/wikipedia/fr/d/dd/Logo_de_Lockheed_Martin.svg

Boeing Company : Charts & Financials


Boeing Company : Consensus estimates


http://www.factset.com/

4.2. Computing stock price using a DDM

4.2.1. A simple DDM

• Gordon & Shapiro (1956) :

– Autofinanced perpetual growth g = ROI × b

– Earnings per share……………. EPSt+1 = (1+g) × EPSt

– Dividend par share…………… Dt = (1-b) × EPSt

– Cost of capital………………… k

• CAPM :

• Stock PV :


Analysts

forecasts

Market data rrErrE mii

gk

gD

k

gD

k

D

k

DV

t

t

1

1

1

1...

10

10

10

4.2.2. Application & limits

• Boeing stock snapshot :

• Market & stock data :

– LT market return…………. E(rm) = 8.50 %

– Risk free rate……………… r = 3.50 %

– Boeing beta…..................... = 1.30

– Boeing dividend………….. D0 = 1.68 USD

– EPS growth forecast……… g = 7 %

• Theoretical value............... V0 = 59.92 USD


k = 10 %

4.2.3. A more sophisticated DDM

• Analysts forecasts concerning Boeing :

– D1 = USD 2.00

– D2 = USD 2.50

– D3 = USD 3.00

– from D3 to D growth rate g = 6.00 %

• Formula :

• Value : V0 = USD 65.87


gk

gD

kk

D

k

D

k

DV

1

1

1

111333

3

2

210


• Economic growth : GDP

Producers opinion

Consumers sentiment

Retailer sales

• Inflation : CPI

Commodity prices

Production prices

Personal income

• Investors risk aversion

• Market efficiency : P0 vsV0

5. Factors that affect stock prices

gk

gDV

100

30/09/2011 Pr. Didier Folus

5.1. Key economic

growth indicators

• Purchasing Managers Index

Institute of Supply Management

• Index of Consumer Sentiment

University of Michigan

• Consumer Confidence Index

Conference Board

• Retail Sales Index

Cyclic stocks are sensitive

to economic cycle

Source :

ECB, Sep 2010.


• Commodity Price Index

Bureau of Labor Statistics

• Production Price Index

Bureau of Labor Statistics

• Personal Income Index

Commerce Department

5.2. Key inflation

advanced indicators

All stocks are sensitive

to Central bank policy

Source :

ECB, Sep 2010.

5.3. Empirical

risk premium


Documents

3. Stock market quotations : Euronext vs Nasdaq 3.1 ...storage.canalblog.com/21/24/366275/68715926.pdf3.5. Nasdaq stock market quotations 3.5.1. Nasdaq segments (Dec. 2010) 30/09/2011