The Park Place Economist


As of January 2011, there were $ 14 trillion invested in the New York Stock Exchange (NYSE) and $55.6 trillion invested in all stock exchanges around the world (World Federation of Exchanges, 2011). To put that number into perspective, the US gross government debt at the same time was $13.5 trillion (US Government Debt, 2011). The US annual GDP, which is the highest in the world, was $14.58 trillion (WorldBank, 2011). Stocks are equities that allow investors to put their money into a company with the hopes of achieving a higher return than that of a savings account or bond. Stock prices fluctuate often and are considered indicators of how well a company is doing. Due to uncertainty there is risk, but if one is skilled at picking stocks then there is the potential for great reward as well. This fact makes knowing the determinants of stock prices very valuable and extensively studied.