Question

Write first 3 ranked stock exchange from USA and one from Turkey, China, Japon and India. Can you explain the power of USA stock exchange with “home-bias”. If home bias is a factor that affects stock exchange market can we say that there is no possibility for emergingmarkets to compete with USA stock exchange. Discuss your answer.

Answer 1

The three ranked stock exchanges in USA are New York Stock Exchange NYSE, National Association of Securities Dealers Automated Quotation System NASDAQ and AMEX. In turkey , BORSA ISTANBUL BIST is the largest stock exchange. In China, Shanghai Stock Exchange SSE. In Japan, Tokyo Stock Exchange TSE is the largest stock exchange and In India it is the National Stock Exchange of India Limited NSE.

Home bias is a tendancy for the investors to invest majority in domestic equities which will reduce the legal restrictions and additional transaction costs.And now since US is the richest country in the world and investors have a home bias towards US stock exchanges which attracts most attention and funds.US benefits from dollar being the world's reserve currency. Investing in foreign equities tends to lower the systemmatic risk and foriegn investors are less likely to be affected by the domestic market changes.US stock exchange is important stock exchange and accounts for 25% of the global GDP. Hence it would be difficult for the emerging markets to compete with US stock exchanges or they should find an alternative. Say if any country is financially sound and emerging markets needs to find out whether it is having the best pricing system.

Thus we can say US stock exchange has a great power in home bias.