The London Stock Exchange

Résumé du document

Financial globalization has grown since the nineties. In 2004, the portfolios of British institutional investors contained 26% of foreign assets. In comparison, this rate was of 11% in the United States and 23% in Japan, which makes the LSE the biggest international Stock Exchange. Moreover, as the Stock Exchange capitalization increases from year to year, it is interesting to analyze in what way it contributes to the economy of both UK and Europe. Analyzing whether the LSE is an efficient market will allow us to identify the possible causes for the changes in the British market and suggest possible future scenario for the FT-SE 100, the Dow Jones and the CAC 40. To understand how the London Stock Exchange affects the economy, one must assess the importance of the LSE compared to the British and European economy. In 1995, the capitalization of the UK reached 1,346 billions of dollars, which was equivalent of nearly 8% of the world's capitalization. In 2005, the volume of transaction of domestic actions was of $ 5,176 billion, which was twice as much as that of Euronext.

Extraits

[...] Today, the trend seems to be good for the indices but who can really tell what is going to happen? Jacques Marseille, a famous French economist, has pointed out the fact that the CAC 40 has never increased more than four years consecutively . At the end of the day the most reasonable behaviour may be to wait and see . Bibliography The London Stock Exchange: A History par Ranald C. Michie (Broché - 26 avril 2001) The London Stock Exchange par Great Britain. Parliament. [...]

[...] That could increase the lack of liquidity of the smaller Stock Exchanges. - The companies will have to respect the regulations of the new Stock Exchange, even if those regulations are more restricting. The efficiency of the LSE To know whether a market is efficient or not, business analysts can use the EMH the Efficient Market Hypothesis. This modern economic theory shows that share prices reflect the proper risk-return relationship, that means they give a certain amount of risk in exchange for which people expect a certain amount of return. [...]

[...] Some hypotheses for the future It seems, looking briefly at the variations in the indices, the stock exchange appears to be a barometer of the health of global economy. Of course figures provided by states growth, inflation and interest rates or by firms profitability and productivity are expected by traders, the ones who act on the stock exchange, every day but their echo is small, in fact, their influence is limited to some shares or to the values of shares in a precise industry, they do not have a big impact at a wider scale. [...]

[...] The explanation lies on the fact that this index is calculated differently. Only the value of the shares is considered, i.e. the number of shares does not influence the index evolution. However the Dow Jones remains the index that had the largest growth within the period since it has been multiplied by between 1995 and 2007 whereas the FTSE-100 and the CAC 40 have respectively been multiplied by 2 and 3. The way the indices grow is also different; the FTSE-100 and the Dow Jones have a linear raise between 1995 and 2000 whereas the evolution of the CAC 40 is more exponential, beginning to mount a little later but raising in a more intense way after. [...]

[...] - FTSE–100 The FTSE 100 is the main index of the London stock exchange. It appeared on July 1984 and is based on the shares of the 100 most highly capitalized companies listed on the London Stock Exchange. Evolution of indexes over the ten past years Here comes a graph that compares the evolution of the FT-SE 100, the Dow Jones and the CAC 40 over the ten past years with some explanations for each specific movement: It is firstly relevant to note that the three indices follow the same average evolution. [...]