C
calibre2001
Member
Question reads:
Evidence suggests that a significant proportion of the price movements of many shares traded in a domestic equity market can be attributed to overall market movements rather than features of the specific companies.
Explain why this may be the case.
Looking at the examiner's comments,
In part (i), answers tended to be too limited in scope, concentrating on the macro-economic factors. The question was asking why there is systemic risk in this situation, not what systemic risk is. Comments about domestic companies having similar resource costs were often made at a sector-specific level which missed the point oft the question. Few candidates got to grips with the issues leading to a block demand for equities, irrespective of individual company or sector performance. Many answers suffered from lack of clarity and structure, which led to much repetition and hence wasted time.
I can see that the question is talking about systematic risk. And that we're supposed to explain why it causes demand and supply of equities to fluctuate (hence price change)
But I don't see how the 'block demand of equities' bit comes in. A significant part of the answer are basically factors that cause investors to demand for assets (i.e. change in liabilities, regulatory changes etc)
I'm under the impression the wording of the question isnt very clear. I just want to know what are the keywords that would point to the 'block demand of equities' bit. Appreciate your views. Thanks.
Evidence suggests that a significant proportion of the price movements of many shares traded in a domestic equity market can be attributed to overall market movements rather than features of the specific companies.
Explain why this may be the case.
Looking at the examiner's comments,
In part (i), answers tended to be too limited in scope, concentrating on the macro-economic factors. The question was asking why there is systemic risk in this situation, not what systemic risk is. Comments about domestic companies having similar resource costs were often made at a sector-specific level which missed the point oft the question. Few candidates got to grips with the issues leading to a block demand for equities, irrespective of individual company or sector performance. Many answers suffered from lack of clarity and structure, which led to much repetition and hence wasted time.
I can see that the question is talking about systematic risk. And that we're supposed to explain why it causes demand and supply of equities to fluctuate (hence price change)
But I don't see how the 'block demand of equities' bit comes in. A significant part of the answer are basically factors that cause investors to demand for assets (i.e. change in liabilities, regulatory changes etc)
I'm under the impression the wording of the question isnt very clear. I just want to know what are the keywords that would point to the 'block demand of equities' bit. Appreciate your views. Thanks.