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Capital Markets

Table of Contents

Part 1.

Journal

Introduction.

Week 1.

Week 2.

Week 3.

Week 4.

Week 5.

Week 6.

Three Days.

Equity Market

Week 1.

Week 2.

Week 3.

Week 4.

Week 5.

Week 6.

Three Days.

Reflection on your trading activities.

Question 1.1.

Question 1.2.

Question 1.3.

Question 1.4.

Research Report

Question 1.5.

References.

Stock Trading Game - Part 1

Introduction

This file is based on the stock trading game that has been grounded on stock marketing. The game trading was initiated on 23rd March 2020, and it has been completed on 14th May 2020. The first week was related to the demo work; demo week, that’s why, it will not be included in the journal of game trading, as it is not the part of trading. Thus, the written journal has included trading initiation from the 30th March 2020, that has been accomplished on 14th May 2020. The weekly based decision has been made for the trading and monitoring methods have been decided as well, for the trade for which the journal has been prepared. For the equity market, eight trades will be made in each week that will consist of four SP/ASX index and four trades will consist of small-cap stockings and large-cap stocking.

Economic and trade behavior has been demonstrated through different figures. Several practical implementations have been learned through the analysis of trade. Technical and fundamental analysis has been used for the decision-making process. Journal has included activities and decision-making processes on a daily basis. Several fluctuations have been included in the journal associated with profitability and price that will be analyzed and measured on the weekly bases as well. The major purpose of performing this game trading is grounded on the analysis of the behavior of the trade market; practical analysis will be utilized by performing practical activities such as AUD/USD Pair and Foreign Exchange.

Week 1

Week one was based on the demo, as it has been described before, and it wasn't very clear. It was mainly associated with theoretical knowledge rather than practical knowledge. It was confusing as there was a lack of practical knowledge in me. The basics of this week were associated with the determination of the prices. As I did not have practical knowledge, the investment was made hypothetically, and it was small as well. The lesser knowledge of the basic factors of the stock market can impact the price. However, the training was helpful here, and the knowledge that was gained in training, I utilized it in the first week (Tekçe, 2016).

I was aware that I have to trade at least once in a day, and eight in a week, I didn’t care about the pricing because I don’t know the pricing behavior. I trade in the first week on the bases on the knowledge of the training week that resulted in less profitability. The main issue I faced in the first week, was lesser knowledge because of this I didn’t act as an analyst in the first week and missed the factors that can affect the trading (Tekçe, 2016).

Week 2

On the basis of the experience of the first week, I started to analyze the factors that affect the price in the second week. I initiated my analysis in the stock exchange market. It created a significant difference as it stabilizes the prices in the market by utilizing some factors. I have also noticed economic speculations and conditions here as well, and I utilized them in decision-making processes. These were the reasons that I showed better performance in the second week as compared to the first week. The main learning this week was an increase in the understanding of the behaviours of marketing; however, much improvement was still needed to understand the trading fully (Drakopoulou, 2016).

The main achievement this week was that I started to analyze the basic factors of pricing. However, I was still weak in considering the exchange rates and the factors associated with them. I was now completely aware of the pricing factors; I analyzed the market on the bases on pricing and ignored the impacts of exchange rates. My first trade on the first day was based on the anticipation of the future of the market. I learned that FA is very important as it helps in examining the financial and economic factors. I considered marketing factors and improved my trading. I learned that technical analysis assists in the forecast of the price of stocks in stock marketing. I estimated here that monthly forecasting is not sufficient, so weekly forecasting is more effective (Drakopoulou, 2016).

Week 3

The interest rate was measured in the third week; the main learning in this week was associated with the learning the interest rates and profitability associated with them. I also learned the impact of the factors that have an influence on the interest rates on the economy such as the supply of cash, borrowing of government, inflation, central bank policy of monetary objectives, etc. (Moneycontrol, 2019). I also learned in this week that change in the interest rate could affect the rate of profitability. As the interest rate at the start of the week was 6.622%, it was increased to 6.623% (Boachie, 2016).

I learned that increase in the interest rate decrease the profitability to 0.04%. I came to know about various factors that are affecting the interest rate of the economy. I focused on the factors of interest rate, including the marketing factors. These were the major reasons that the profitability was increase with the increase in the experience of the trading. I collected the historical prices that were recorded in the previous weeks and forecasted the pricing behavior of the running week (Boachie, 2016).

Week 4

This week was associated with plenty of practical knowledge. I learned several things, such as pricing factors, marketing factors, and economic behaviours. Now, I was aware of the impacts of these factors on the profitability of trading. The major focus of this week was based on the economy and factors of the economy. I read articles about the factors that were affecting the exchange rate of the economy. Here I understood the impact of exchange rates and the factors that can affect the exchange rates (Lim, 2016).

I realized that the exchange rate significantly impacts profitability and pricing, so I increased my focus on the factors of the exchange rate. I started analyzing the exchange rate impact and extents to which the exchange rate can change. In this week, COVID-19 was the major element in the economy that decrease the growth of the economy. Prices and profitability were decreased because of this Pandemic. The major flaw I noticed in myself was that I couldn’t understand the factors that were impacting the economy (Lim, 2016).

Week 5

This week was the succession of the Pandemic. Also, it impacted on the prices in the market to an extreme extent. In spite of Pandemic, I learned various things associated with stock market trading. My experience related to the stock marketing trade was increased, and I realized the factors that can impact the behaviours of industry and businesses. I started the analysis of these factors and the factors that were impacting the stocks’ prices in the market. FA made it clear to me that the decrease in the profitability because of COVID-19, and I realized that if the effects of Pandemic can be controlled than marketing can be continued effectively. In this week, I realized that even if the economic factors are disturbed, there are still many chances to continue the marketing by analyzing the marketing conditions and the factors that can affect the economy (Baker, 2020).

Week 6

This was the last week, and I experienced my learned knowledge, and I enhanced my learned knowledge as well. I utilized my learned knowledge and experience in practical implementations. I realized that I learned very important knowledge, and the trading game proved to very fruitful to me. The major factor in the week was still Pandemic, but even than marketing and economy continued. The profitability ratios were also according to the estimated amounts and according to the forecasting based on the learned knowledge and experience of the previous weeks. The major focus of this week was on the following the economic patterns and factors that can affect the market and trading. Thus, it can be concluded that the overall experience was fruitful, that increase my knowledge and experience for trading in the stock market. I was now able to analyze the trading market of the stock exchange (Baker, 2020).

Three Days

Six weeks was completed on 11th May 2020, but trading was accomplished on the 14th May 2020. In these three days, the performance was evaluated on the bases of six weeks. In addition to this, three days performance was also evaluated on the bases of outcomes of learning from the trading game. The performance evaluation was mainly based on the positive profitability and control of pricing in the trading of the stock market (Drakopoulou, 2016).

Equity Market

Week 1

On the basis of the Market, the first week was associated with the relation of demand and supply. I was unable to monitor the relationship between supply and demand. I was also unable to manage the supply and demand as well. However, luck was with me in starting three days, and I earned a positive return without doing any specific work. However, the upcoming days of the week proved to be very difficult, because the focus on the practical knowledge increased for the implementation. The major milestone of the first week was the decision-making process for increasing the learning of the common people. I didn’t play any specific role in this process, because I didn’t have any well-considered knowledge regarding this. So, the first week was completed without learning any specific knowledge (Blankespoor, 2020).

Week 2

Week two was somehow based on practical knowledge, and I started to focus on major aspects of trading on the bases of equity ratios. I started focusing on the demand and supply and prediction of these factors in marketing. I realized that if the demands of the stocks are high, the pricing factors of the stocks will increase. Thus, if the demands will increase, it will directly be linked to the increase in the prices and consequently the profitability. I learned that if the demands of the stocks will decrease, it will decrease the prices and similarly, will decrease the profitability of the stocks (Dwyer, 2020).

I learned the concept of equilibrium relating to the demands and supply. I realized that changes in the demands and supply could impact the market equilibrium. I learned the concept of market equilibrium; I came to know that market equilibrium is the state when supply and demand of the stocks are equal. In technical analysis of the equity market, I learned in this week that equilibrium would be achieved when stocks are equal to the demand, and there is no shortage of the stock concerning the demand. I also focused on the historical price trends as well, and I increased my knowledge to the extent that I was regarded in the decision-making process. I included some factors in the process of making a decision, that were foreign exchange rate, and conditions of market and behaviours of the market as well (Dwyer, 2020).

Week 3

In this week, I utilized article for the learning the effect of the market player. I learned that the market player can impact profitability and can change it. I learned that the use of authoritarian style could change the prices, and this change is positive for increasing profitability. Thus, the market player is important to increase profitability. However, this factor is important in the monopoly market. The reason is the monopolistic market is associated with the increased fluctuations in the prices, including increased fluctuation in the demands that would be inelastic. This was the reason that my major focus was on the fluctuation of the demands and prices in the monopolistic market. However, the focus was no so long because this factor is not common and cannot be applied to other markets rather than the monopolistic markets. Thus, I changed my mode of focus in the coming weeks, because of less importance of these factors (Ashraf, 2018).

Week 4

Week four was associated with several activities. I started this week by focusing on demand. My major perspective related to focus on the demand was to increase the demand in equity. However, I was unable to identify the reasons for which I can increase the demands. Here, I realized that equity ratios are mostly linked with the identification of the factors associated with the increase in demand. I used large-cap and small-cap stocks this week and used fundamental analysis to reveal the profitability ratios. The fundamental analysis showed stable growth in profitability. I also learned that the growth of equity is possible to measure on the daily bases. When I measured the equity growth, I realized that there were fluctuations in the equity ratios on a daily basis. In this week, the overall equity ratios were stable, and the same was with the prices. Technical analysis was also used, that revealed price fluctuations in the equity ratios. The fluctuations in the prices were based on the COVID-19, as people were demanding more and resources were lesser to meet the demands that increased the prices (Ng, 2019).

Week 5

Week five was full of experience; I was able to deal with the trading and trade market. As I have used different market on daily bases, now I was able to differentiate in the dealings of each market. It took me weeks and weeks to be able to deal with the trading. I realized the importance of trading on a daily bases as well as on a weekly basis. Fundamental analysis has shown here that profitability was increasing on the daily bases and as well as on the weekly bases. It was also showing stable growth over these weeks. Fluctuations in prices and demands were indicated in the technical analysis. I have enough experience here that I was able to manage these fluctuations effectively and efficiently (Ahmar, 2017).

Week 6

This was the last week, the evaluation of the previous weeks of the equity market, I realized that the equity market was somehow easy to learn and manage as compared to the trading of the stock market. The overall fundamental analysis of the equity market has shown that there was positive profitability in each week, except for the fourth week. The technical analysis of the weeks was also performed on the bases of historical data, and prices and demands. The technical analysis of the data revealed that the fluctuations were obvious in the prices in all weeks. Practical knowledge was significantly increased in six weeks, and I learned much about the supply and demand (Ahmar, 2017).

Three Days

The period of equity market was mainly based on the six weeks; however, it also included three other days. The overall trading of the three days was majorly grounded on the equity market. The major focus on the better and affect results to increase in the interpretation to a significant extent. I draw a comparison of myself on the bases of conditions before and after the gameplay of trading. I realized that this game was very important as it has increased my understanding regarding the trade behaviours and the factors that impact on the trading. This also increased my practical knowledge. This was an important experience that increased my practical knowledge for the first time in my life. These days were proof of my better performance in the equity market (Ahmar, 2017).

Stock Trading Game - Part 2

Reflection on Your Trading Activities

Question 1.1

The market price is based on the current price in which the services or products can be sold or purchased. The asset market price is determined and analysed by the supply and demand forces. Exchange rates are affecting the international trade as the exchange rates that are low export economy and domestic goods are not expensive for the buyers that are mostly foreign. The interest rate can decrease if there is a collapse in the economy. Many factors affect the exchange rate such as inflation rate, interest rate, trade terms, political performance, and stability (CompareRemit, 2020). The foreign exchange rate is one of the essential means through which the economic health level is determined. It is constantly analysed and watched as the market inflation rate caused currency exchange rates. Lower inflation can slow the price the services and goods. Interest rate change can impact the value of the currency. Amplification in interest rates can cause the currency to appreciate at the greater interest rate and attract more capital that can increase the exchange rates. Thus, the prices are impacted by the inflation of countries (Jacobs, 2020).

Various factors are affected by the equity rate. Many factors impacted equity pricing while performing and analysing the game. The economy driving force us the borrow money economy. The payment balance is another factor that affects the equity and the international transaction volume impact the country's economy and stock market extension. The government policies are also considered as the prices are significantly changing and investors that are of short term and long term can affect the prices (Tang & Yao, 2018). Thus, supply and demand can impact market shares. When share demand increase from supply then it means that the buyers are more in number than sellers and if it is less then, there is a decrease in price. Political factors range from the relations with nations that can affect the price shares.

Question 1.2

  1. Many factors affected the exchange rates and they played their role in playing the game. The relative interest rate is the factor that causes an appreciation of the currency. The exchange rate movement is not clear as it leads to the greater index value and the increase in inflation can cause to drop the tighter monetary policy possibility leading to the increase in interest rates. If the authorities can change the share policies, then it can affect the exchange rate. I think, along with other effects, the interest rate is the main factor that affected the game. The monetary policy is also the factor as it increases the country's currency value and demand. Thus, lagged inflation, capacity utilization growth, and market volatility are the main factors(Ponomareva, Sheen, & Wang, 2018).
  2. In the markets of equity, there are also specific factors that contribute to the exchange rate alteration. This is based on the supply and demand factor. The prices of stock are changes by the forces of the market. If individuals want to buy and sell a stock, then the demand and supply would be greater and the prices will decrease. When there is a fall in prices, then the buyers find it more attractive and thus, there is an increase in demand. Stock gives the chance to gain profits in the value of the stock for investors and influence the game and consumer confidence that can impact the overall economy(Fahlevi, 2019).

Question 1.3

In gaming, there were many factors considered that affected the market prices of both the exchange rate and equity. Changes in interest rate can cause the currency to provide greater rates of lenders and attracting more capital of foreign markets that can cause an increase in the rates of exchange. Political stability is another factor that can impact the strength of the currency and it can attract more foreign investors. The free-market prices are impacted by interest rate fluctuations. The study indicates that the order flows are more attractive and provide great economic value. This shows that the groups of customers can share the risks and differ in risk exposure and trading styles (Menkhoff, Sarno, Schmeling, & Schrimpf, 2016). 

Question 1.4

Many decisions were made during this game based on various factors. Such decisions were made based on the price consideration and exchange rates. I have considered the major factors that can impact the foreign markets and prices and draw the conclusion that the equity market among others is more favourable and considerable while making effective decisions. Many challenges can be faced in the foreign exchange market and these include currency volatility management, incorporating variable costs, payments that are cost-effective, and payment schedules (Lindorfer, d'Arcy, & Puck, 2016). Thus, payment balance is one of the challenges that I have faced. This decision is made to monitor and check the behaviors and pricing in markets.

These decisions from the market were grounded on just evaluation and predictions and it is used efficiently, then it can help us to be successful. I have used the strategy to focus on targets, systematic growth, thinking long term, and be inclusive. This will be the strategy that is used and I will use it in the future to make and imply such decisions. The game has provided many opportunities to learn and gain something. This helped me to learn about market terms such as inflation rate, interest rate, demand, and supply, etc. These concepts were vague in my mind but I now understand these. Thus, to sum up, all market behaviors are learned.

Stock Trading Game - Part 3

Research Report

Question 1.5

The Sovereign yield curves are associated with the bonds that are issued in currency by government and banks with high credit ratings borrow money at different rates. Many national expenditures are not fulfilled so the government to fulfill those borrowing money. This bond is the instrument of debt that is issued and given by the government. This can be dominated in the currency of both domestic and foreign. This can promise to pay the particular interest amount to repay the value on maturity. The yield line that is described shows the line between the bond's interest rates at varying maturity dates and included debt quality. If there is a change in line then it shows that the economic activities and interest rates of the market are changed over the specific time (Presbitero, Ghura, Adedeji, & Njie, 2016). This line is grounded in predicting and analysing the growth and output of the economy. This shows the time between three months to thirty years.

The sovereign yield curve on the specific date that is February 28, 2020, presents the 0.9 yields. If it goes from three months and enters on 1 year then it consists of a period of seven months and from the curve, the yield decreased to the amount of 0.7. There is a decrease further in the curve that is seen and 0.3 is the lowest yield. This shows that after five years the yield increased and the yield after nine years has been increased and amplified to 0.391. This analyses that the maximum yield can be gained and is almost 1.397. Most of the yields can be achieved after 30 periods of time. Despite the trend, the main yield can be achieved. The results showed that the decrease in yield is seen in the second curve. In the second curve, the value at 30 years is almost 1.302 which is reduced from the previous ones. This decrease and reduction in trend show that there were conditions that showed this decline. The need to consider other factors is necessary as it can affect the yield. The proper planning and decision making are helpful to increase the yield.

The economic factors are not easily analysed and controlled so this curve in second shows that there is no growth and increase in sales. Behavioural economics is based on the decision making that is grounded on the understanding for marketers and allows a better understanding of planning and evaluating. This analyses that the interest rates are not according to the evaluations. Higher interest rates moderate the growth of the economy and increase the borrowing cost and thus restrict consumer spending growth. It can mitigate the pressures of inflationary and cause the exchange rate appreciation. The recession is shown there that refers to the great amount of reduction in the activity of the economy. It is a state where the game can see low demand and growth and price can be reduced.

COVID-19 news has spread havoc all around the world. Despite the narratives, one thing that is confirmed is that there is a recession in the global economy. Many country's banks have slashed the interest rates. Most of the individuals have lost their jobs and rates of unemployment have been increased. The inflation rate can be a major analysing factor that can secure the growth yield. The prices are increased and thus, the economy is disturbed. The economy rate can be fixed by mitigating the borrowing cost and increase investment and consumer spending. The higher global growth can lead to an increase in spending on export (Ozili & Arun, 2020).

COVID-19 has changed the economic conditions and millions of individuals have been put on the retention schemes of jobs like hospitality and tourism and came under lockdown. This shows that the virus has damaged the world like no other thing. It expects the growth to increase the pandemic decrease. The business operations limitations have affected the growth of demand and supply and thus the transaction of international markets is blocked and thus the curve shows this economy yield. The economy has been disturbed and the small and large businesses are highly affected.

References for Stock Trading Game

Ahmar, A. (2017). Sutte Indicator: A technical indicator in stock market. International Journal of Economics and Financial Issues,.

Ashraf, S. (2018). Efficiency and Memory Dependence of Shariah Equity Markets. Journal of Islamic Economics, Banking and Finance,, 1-13.

Baker, S. R. (2020). The unprecedented stock market reaction to COVID-19. The Review of Asset Pricing Studies.

Blankespoor, E. (2020). Disclosure processing costs, investors’ information choice, and equity market outcomes. A review. Journal of Accounting and Economics,, 101344.

Boachie, M. K. (2016). Interest rate, liquidity and stock market performance in Ghana. International Journal of Accounting and Economics Studies,, 46-51.

CompareRemit. (2020, April 9). 8 Key Factors that Affect Foreign Exchange Rates. Retrieved from compareremit: https://www.compareremit.com/money-transfer-guide/key-factors-affecting-currency-exchange-rates/

Drakopoulou, V. (2016). A review of fundamental and technical stock analysis techniques. Journal of Stock & Forex Trading, 5.

Dwyer, B. (2020). Small-scale private equity: demand versus supply. Accounting Research Journal.

Fahlevi, M. (2019). The Influence of Exchange Rate, Interest Rate and Inflation on Stock Price of LQ45 Index in Indonesia. In First International Conference on Administration Science (ICAS 2019). Atlantis Press.

Jacobs, D. (2020). How Do Global Financial Conditions Affect Australia? RBA Bulletin, December, viewed, 21.

Lim, K. (2016). Factors affecting investment intentions: A consumer behaviour perspective. Financial Literacy and the Limits of Financial Decision-Making, 201-223.

Lindorfer, R., d'Arcy, A., & Puck, J. (2016). Location decisions and the liability of foreignness: Spillover effects between factor market and capital market strategies. Journal of International Management, 22(3), 222-233.

Menkhoff, L., Sarno, L., Schmeling, M., & Schrimpf, A. (2016). Information flows in foreign exchange markets: Dissecting customer currency trades. The Journal of Finance, 71(2), 601-634.

Moneycontrol. (2019, April 26). Explainer: Six factors that influence interest rates in an economy. Retrieved from moneycontrol: https://www.moneycontrol.com/news/business/personal-finance/explainer-six-factors-that-influence-interest-rates-in-an-economy-3549621.html

Ng, C. C. (2019). Ng, C. C. A., Shen, J., & Rhee, S. G. (2019). Fundamental analysis and stock returns in international equity markets. The Hong Kong Polytechnic working paper., 20.

Ozili, P. K., & Arun, T. (2020). Spillover of COVID-19: impact on the Global Economy. Available at SSRN 3562570.

Ponomareva, N., Sheen, J., & Wang, B. Z. (2018). The common component of bilateral US exchange rates: to what is it related? Empirical Economics, 56, 1251-1268.

Presbitero, A. F., Ghura, D., Adedeji, O. S., & Njie, L. (2016). Sovereign bonds in developing countries: Drivers of issuance and spreads. Review of Development Finance, 6(1), 1-15.

Tang, X., & Yao, X. (2018). Do financial structures affect exchange rate and stock price interaction? Evidence from emerging markets. Emerging Markets Review, 34, 64-76.

Tekçe, B. (2016). What factors affect behavioral biases? Evidence from Turkish individual stock investors. Research in International Business and Finance,, 515-526.

Remember, at the center of any academic work, lies clarity and evidence. Should you need further assistance, do look up to our Economics Assignment Help

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