Nowadays it could be assumed that the level of globalisation in the financial sector is very high with participants acting global. The financial markets especially the stock markets allow companies to raise funds by letting the public all around the world to participate. On the other hand investors have the possibility to take part in global- or regional-acting corporations and consequently increase their economical wealth. This work will discuss the role of stock markets as part of the financial system. For that purpose it will analyse the organisation of stock markets including structure, participants, efficiency and regulatory framework with concentrating on the London Stock Exchange (LSE) and the Frankfurt Stock Exchange (FSE). Last but not least it is comparing two main stock markets in Europe, the LSE which is the main stock market for the UK and the FSE which is the main stock market for Germany, by giving some historical and structural data.
Table of Contents
1. Introduction
2. Literature Review
2.1 Scope
2.2 Organisation of Stock Markets as a whole
2.2.1 Role and Structure
2.2.2 Role of Intermediaries
2.2.3 Efficiency
2.2.4 Regulatory
3. Application
3.1 London Stock Exchange versus Frankfurt Stock Exchange
3.1.1 The UK Stock Exchange
3.1.2 The German Stock Exchange
3.2 Conclusion
Research Objective and Key Themes
This work examines the fundamental role and function of modern stock markets within the global financial system, with a specific focus on the operational structure, regulatory frameworks, and market efficiency of the London Stock Exchange (LSE) and the Frankfurt Stock Exchange (FSE).
- Theoretical analysis of capital market structures and the role of financial intermediaries.
- Evaluation of market efficiency concepts, specifically the Efficient Market Hypothesis (EMH).
- Comparative analysis of the London Stock Exchange and the Frankfurt Stock Exchange.
- Examination of historical developments and the regulatory environments in the UK and Germany.
Excerpt from the Work
2.2.3 Efficiency
Financial markets (bond and stock markets) should provide greater economic efficiency by allocating funds from people who don’t have productive use to people who do. (Mishkin, 2007:3) This generates higher level of savings which results to higher investments and these results again to a higher rate of economical growth.
Financial markets efficiency can be considered from a variety of viewpoints. For example the allocative efficiency with which the funds would be allocated to their most productive use. This means that companies with the best marginal returns would receive the capital. On the other hand the operational efficiency could be considered where trades to raise capital are carried out quickly, reliable and at minimum of costs. Furthermore, this would lead to minimal transaction costs and additionally the competition between brokers would ensure just normal profit in the security industry. (Pilbeam, 2010:237) The most important concept of efficiency in the literature is the information efficiency which is strong relate to the pricing of securities. This kind of efficiency discusses how the current market price reflects all the relevant available information and how they react to changes in information so that abnormal returns cannot be made on a consistent basis. In this relation the markets are efficient if the “security prices fully reflect all relevant information”. (Howells and Bain, 2008:572) Furthermore, Neale and Pike (2009:33) state that “the measure of efficiency is seen in the extent and speed with which the market reflects new information in the share price”.
Summary of Chapters
1. Introduction: Presents the global nature of current financial markets and outlines the comparative approach between the LSE and the FSE.
2. Literature Review: Discusses the theoretical foundations of capital markets, the role of intermediaries, efficiency theories, and regulatory necessities.
3. Application: Provides a practical comparison of the structural and historical characteristics of the UK and German stock exchanges.
3.1 London Stock Exchange versus Frankfurt Stock Exchange: Analyses the market-based nature of the UK system versus the bank-based system in Germany.
3.1.1 The UK Stock Exchange: Details the history, listing criteria, and market segments of the London Stock Exchange.
3.1.2 The German Stock Exchange: Details the development, market segments, and characteristics of the Frankfurt Stock Exchange.
3.2 Conclusion: Synthesizes the findings regarding the roles, regulatory needs, and comparative performance of the studied stock markets.
Keywords
Stock Market, London Stock Exchange, Frankfurt Stock Exchange, Capital Market, Efficient Market Hypothesis, Financial Intermediaries, Regulation, Equity, Bonds, Corporate Finance, Securities, Market Efficiency, UK Financial System, German Financial System, Investment.
Frequently Asked Questions
What is the primary focus of this academic work?
The work explores the core functions of stock markets within the modern global economy, analysing how these institutions facilitate the movement of capital and support economic growth.
What are the central themes addressed in the paper?
Key themes include market structure, the role of financial intermediaries, theories of market efficiency, regulatory frameworks, and comparative data on European stock exchanges.
What is the main research objective?
The goal is to provide a comparative analysis of the London Stock Exchange and the Frankfurt Stock Exchange to understand their operational differences and historical backgrounds.
Which scientific methodology is employed?
The study utilizes a descriptive and comparative methodology, drawing upon established financial theory and historical/structural data to contrast the UK and German market models.
What topics are covered in the main body of the paper?
The main body covers theoretical frameworks (efficiency, regulation, intermediaries) and an applied section comparing specific market segments and indices like the FTSE 100 and DAX 30.
How is the research characterized by its keywords?
The work is defined by its focus on stock exchange mechanisms, institutional regulation, and the comparative analysis of equity markets in highly developed economies.
How does the UK financial market differ from the German one according to the author?
The text suggests that the UK system is primarily market-based, while the German system is traditionally bank-based, with banks playing a significant role in corporate finance.
What is the significance of the Efficient Market Hypothesis in this study?
The EMH is used to discuss how security prices reflect available information, serving as a theoretical lens to evaluate the efficiency of the markets under review.
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- Panagiotis Papadopoulos (Autor:in), 2010, Role and Function of Stock Markets, München, GRIN Verlag, https://www.hausarbeiten.de/document/170223
