Broad-Based Index

  

A basket of securities intended to be representative of the overall market.

When trying to understand how the stock market works, Madison decided to focus on the Dow Jones Industrial Average, since it is the broad-based index with the fewest individual components. By doing so, she learned how defensive and cyclical stocks perform against each other, that financial companies are highly sensitive to interest rate changes, and that 3M is a publicly traded company (not the Dow’s number of Instagram subscribers, as she had originally thought).

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Finance: What is a thin market?13 Views

00:00

Finance allah shmoop what is thin market peahen happens when

00:07

few stocks are trading on bonds to actually thin is

00:12

illiquid thin is when there just aren't a lot of

00:15

buyers at the given price levels Thin is when trading

00:19

volumes are described by the kindly wise cnbc commentators as

00:25

being anemic Thin is when the headlines ask where have

00:29

all the stock buyers gone Long time passing bob dylan

00:34

i'll go ask your parents finn is it Well not

00:37

this guy Fat is high volumes lots of cash being

00:41

put to work Buying securities fat is big demand to

00:44

buy a big supply of supply Fat or liquid markets

00:48

are generally driven by cash being put to work which

00:52

either came from investors who simply saved their pennies to

00:55

then deploy them in the market's taking on more risk

00:58

by being exposed to more volatility and generally speaking hi

01:02

liquidity even in a world where the stock market is

01:05

flat is generally perceived as bullish or positive voting in

01:09

the future of stock market values Yeah so what does

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all that mean Money being put to work is good

01:14

It adds liquidity It means people are hopeful optimistic lots

01:18

Of opinions Then goto work assessing the upside and downside

01:22

of the market such that the gumball estimate effect is

01:25

in place And if you didn't go to third grade

01:27

in the last decade the gumball estimate game revolves around

01:30

the idea that if many opinions estimate the number of

01:33

gumballs in this big fish tank those numbers get averaged

01:36

and way more often than not The average guesses in

01:39

fact very close to the actual number of gumballs crushing

01:43

down on the innocent guppies and other goldfish below The

01:47

same holds true in the stock market where the aggregation

01:49

of many opinions usually makes for better decisions or at

01:53

least more accurate estimates And in the case where a

01:55

market suddenly grows thin it means that a lot of

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educated well heeled invest astors have been spooked by the

02:02

notion of taking on risk in their portfolios by taking

02:05

their safe cash and risking it in the market So

02:09

they d risk or simply then keep cash in their

02:12

wallets Not wanting to put it to work until better 00:02:15.065 --> [endTime] signs come from you know on high

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