Question

. Throughout this chapter, investor expectations are mentioned. Could this account for much of the volatility in the stock market? Investors adjust their expectations as they receive information, and thanks to technology like hand-held computers and cell phones, receipt of information is nearly instantaneous. Discuss how just the technological changes in the last 10 years have affected the stock market and investors.

Answer 1

The changes in technology have affected the stock markets and investors in numerous ways :

• Immediate transfer and registration of securities – In a depository environment shares are transferred in the name of the buyer immediately there is no delay in the process.
• Elimination of all risks associated with physical certificates – Handling physical share certificates have been very problematic since there is risk of theft, loss and mutilation, dematerialisation of securities have eliminated all of these risks.
• Trading in accordance to our convenience – We have access to our trading account through our mobile phones these days. We can buy and sell from any place according to our convenience.
• Algorithm trading – Algorithm trading has revolutionised trading and made trading safer and efficient. It basically helps in deciding time, quantity and price of investment by monitoring the market conditions.
• Elimination of bad deliveries – In the depository system once the holding of an investor is dematerialized, the question of bad deliveries does not arise i.e. they cannot be held under objection.
• Quick and plentiful information – Many news agencies and online news platforms provide minute by minute updates about companies and their working. This helps the investors take more informed and quick decisions regarding investment.
• Better delivery of information - Earlier investors were handed huge volumes of papers and periodic status reports to investors regarding their transactions and holdings, now everything is condensed leading to better control.