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Stock Market and Bond Market in the U.S.

COMPARING AND CONTRASTING THE STOCK MARKET AND THE BOND MARKET IN THE UNITED STATES

This research compares and contrasts the stock market and the bond market in the United States from the perspective of the investor. The assessment discusses advantages and disadvantages of each class of securities.

There are several barometers used to describe stock market activity in the United States. The most widely known of these barometers is the Dow Jones Industrial Average of 30 stocks. There are other Dow Jones index averages, utilities and transportation as examples, and there are other indexes, such as such as the Standard and Poors 500, the Wilshire 5000, the NASDAQ, and others. The Dow Jones Industrial Average is easily the most recognizable stock market measure to most people. While the Dow Jones Industrial Average is not as representative of the market generally as are some other indexes, the pattern of movement in the Dow Jones Industrial Average has been found to correlate well with the pattern of movement of other measures of stock market activity in the United States.

Both stock prices and bond prices in the securities markets in the United States tend to be volatile. The volatility of these markets creates risk for the investor. Further, the stock market and the bond market frequently respond different to financial, economic, and political stimuli (Reilly, Wright, & Chan, 2000). Investors, thus, need to know how the two classes of investment vehicles differ from one another if they are to select securities for portfolios that correlate well with their individual investment objectives.

Essentially, bonds are the long-term, public debt of an issuing entity marketed in a convenient and affordable denomination. Bonds are considered are fixed income securities because the debt service obligations of the issuer are fixed, in that the issuer agrees to pay a fixed amount of periodic interest to the bond holder and to rep...

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Stock Market and Bond Market in the U.S.. (1969, December 31). In LotsofEssays.com. Retrieved 04:59, March 19, 2024, from https://www.lotsofessays.com/viewpaper/1689066.html