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In: Finance

1)BUILDING THE CRITERIA: Mid 2015, stock markets in china plunged and a volatile environment took place...

1)BUILDING THE CRITERIA: Mid 2015, stock markets in china plunged and a volatile environment took place until early 2016. Investors suffered big losses due to what is usually refered to as a "market correction". (From article WSJ)

Highlight the most important factors that could have caused this drop in Chinese Stock Market. Consider the concepts of:Market Bubble, Fundamental Value and Market Value.

Solutions

Expert Solution

Market Bubble :- A Market Bubble is related to the economics and are cinsidered in the stock market. It shows the changes in the investor behavious that occurs time to time A Market bubble is just created by a surge in the assets prices that are fundamentally unwarranted

Fundamental value :- Fundamental value is just the method of analysis of the stock on the basis of its fundamentals It is just a tool for comparison of the value to the market price

Market value :- market value of the share means the price of the share at which it is currenlty buying and selling in the market.

The most important factors that could have  caused this drop in Chinese Stock Market are that the most of the investor at that time are trading with the borrowed funds which can increase the overall leverage very much.and one reason is that there are many jitters created in the market at that time . The crash's greatest impact will be that U.S. stocks will plummet due to the fact that major corporations generate high sales in China

jeff jeffy answered 2 years ago
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