The paper 'The Mechanisms Used by Investors in the Share Market' is a great example of a finance and accounting essay. The main reason for the investors trading on the share market is to secure a way of raising funds for their businesses by buying and selling shares. The share market also helps them evaluate the worth of their businesses. The share market behavior will fluctuate time and again (fall and rise), a tendency that is known as volatility. Volatility in most share markets worldwide makes it hard for price-setter to clear interpretations, sometimes resulting in erroneous economic signals (Barnett et al. , 2010).
Therefore, the investment process is surrounded by several risks, for example, systematic and unsystematic risks, which should be well analyzed and managed by investors. These risks sometimes undermine a fundamental maxim of the share market that states “ buy when the price is low and sell when the price is high” because one who buys cheaply but risks incorporated in them is high. Assaf and Cavalcante (2005, p. 6) assert that the share market is, to some extent multifaceted system that itself is a part of a multifaceted system of the economy.
Under this notion, investors employ many mechanisms that help them analyze and manage the stock market risks. As such, the mechanisms help to foresee the future of the share market by establishing the underlying discrepancies and improvising models to base their market predictions. Stock marketThe stock market is an establishment where investors transact their business (stock exchanges), buying and selling securities or equities. These equities are in allotment of shares of different firms. Each share is measured as a unit of possession of a firm’ s value or revenues.
Stock exchanges are perceived to be parameters geared towards marshaling financial resources to aid a most favorable and lucrative investment. Especially in developing nations, which are in dire need of finances to sponsor their development projects, stock exchanges come in handy. In general, the stock market encourages cooperation among investors by creating a neutral ground for investment in respective securities.
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