ABSTRACT
Chapter Five focuses on investment in stock markets, one of the most visible areas of finance. While bonds and derivatives trading make up the bulk of global capital market activity, traditional stock exchanges are still perceived as the most direct connection between capital markets and the ‘real’ economy, enabling ordinary citizens to own shares in familiar and exotic companies. Professional investors regard stock markets as a paradigm of the good society, and the best source of long-term investment returns (Aldridge 1997). Ordinary investors and professional investors are all motivated to ‘beat the market’ (McGoun et al. 2003). While stock markets are a declining portion of global capital, stock exchanges are on the rise – there are now hundreds around the globe. The largest, most active stock exchanges are located in international financial centres, including the two largest, London and New York; as well as centres such as Hong Kong, Tokyo, Chicago, Frankfurt, Paris, Toronto and Zurich, Sydney and Johannesburg. These financial centres have expanded rapidly in size, complexity and distribution channels as more companies turn to the capital markets for finance, issuing bonds and shares, and merging with or acquiring other companies.
