Share Market Assignment Exploring The Interrelationship Between The US Share And Australia Share Market And Components Affecting The Relationship.
Task: How to locate Information using Share Market assignment research strategies to determine the influence of the US Share Market influences Change in the Australian Share Market Assume?
How Information about the US Share Market Triggers Change in the Australian Share Market
Assume the role of a financial analyst and prepare a report
a) Provides examples for different markets around the global, like those above, to illustrate and support your explanations.
b) Presents an argument as to whether or not the Australian share market has information efficiency.
This Share Market assignment will explore the mechanism behind the fact that leads the Australian Stock Market to undergo changes owing to news and information from overseas like the US scenario. The Share Market assignment would be an attempt to adjudge whether the Australian stock market is characterised with a trove of information or not.
Influence Of Australian Stock Market On Overseas News–
In the globalised world,the gaps between things are becoming narrower and for example, it is the continuous change in the use of English words. The English-speaking world is gradually coming to conjecture to have a common language to do away with the sorts of dialects in countries like Australia, the United States, and Canada among others. A similar trend could be evident in the stock markets across the world as the news and information overseas are due to influence the local economy as well. The Australian stock market indeed has components poised of its local and national economies(Pavlidis & Gadir, 2013).But simultaneously, it is associated with the foreign countries like China, the US and others through international trade and commerce activities.
The Australian stocks are very sensitive to the business performances and conditions prevailing in foreign countries like Japan, China, and the US. The economic data and condition of these countries affect the Australian stocks along with the anxiety and achievements. The American condition is the most influential for the Australian stock market owing to its economic dimensions across the world(Lannin & Khadem, 2020). The decisions and actions of the US central bank, the Federal Reserve is due to affect the Australian stocks and the local trade analysts spare sufficient time to understand its implication on the stocks trading far away in Australia. So if the situation in the US is fine, it would be good news for the Australian stock market and vice versa.
On this Share Market assignment we also identify that the US - China relationship is having far-reaching implications in the Australian stock market. It is because China is the biggest trading partner of Australia and a dip in Chinese production is supposed to affect its suppliers like Rio Tinto and BHP(Business Insider Australia, 2014). Australia owing to its unique location wake up each morning to the news across the world after calling it a day from their end. So a surge in the NASDAQ or S&P 500 is sure to be a welcoming opening at the Australian scenario or a decision by the Fed Chief on inflation are awaited on a ponding breath by the Australian counterparts. So it is a fact that owing to the globalisation aspect, the developed countries have established a close-knit relationship amongst each other having a deep influence on its stocks.
Information Efficiency Of The Australian Stock Market:
Information or market efficiency refers to the extent to which the stocks trading in the market through its price shows the relevant information (Atanasov & Black, 2016).The theory used on this Share Market assignment showcases the information through the stock prices having little or no influence owing to external market conditions. There are three sorts of market efficiency – weak form, semi-strong, and strong market efficiency. In the weak form of market efficiency, the market is extremely volatile having no relevance of the historical movement of the stock prices(Scheers, 2016). The semi-strong market efficiency could absorb the new happenings in the business environment but the investors could not benefit from such a situation. The strong-form of market efficiency depicts that the stocks reflect all kinds of information and only the rational investor having deep knowledge of the market could benefit from it.
Like most other markets explored on this Share Market assignment, the Australian stock market also shows semi-strong market efficiency absorbing the sorts of business happening around while the investors could not take advantage of it. For instance, when the US President, Donald Trump announced a stimulus package to revive the US economy off the COVID-19 impact, the Australian market was joyful as well. The ASX index following such announcement rose by 3% and the mining and energy stocks facing a continuous decline were the first ones to turn around(Lannin & Khadem, 2020). So the US announcement impacted the Australian market and the latter is gradually absorbing the information and reflecting it through its stock price. But the investors are yet to make a rational decision out of it as certain sectors say those related to manufacturing are on the green while others are still on red (Fracassi, 2016).
The Share Market assignment shows that alike other stock markets, the Australian stock market is also susceptible to the global changes as in the US, China, and Japan. The Australian scenario is characterised by a semi-strong form of market efficiency.Though the market could absorb the happenings around the world say the US stimulus announcement but the investors are not so sure of its implications in the local market.
Atanasov, V. & Black, B., 2016. Shock-based causal inference in corporate finance and accounting research. Critical Finance Review, 5(2), pp. 207-304.
Business Insider Australia, 2014. Here's How The Overseas Markets Affect Australian Stocks. [Online]
Available at: https://www.businessinsider.com.au/how-the-overseas-markets-affect-australian-stocks-2013-11
Fracassi, C., 2016. Corporate finance policies and social networks. Management Science, 63(8), pp. 2420-2438.
Lannin, S. & Khadem, N., 2020. Australian share market opens down after global markets stung by oil prices, coronavirus - ABC News. [Online]
Available at: https://www.abc.net.au/news/2020-03-10/australian-share-market-opens-after-global-markets-slump/12041394 [Accessed 13 May 2020].
Pavlidis, K. & Gadir, J., 2013. Improving affordability of communications. Australian Journal of Telecommunications and the Digital Economy, 1(1), pp. 122-130.
Scheers, L. v., 2016. MANAGING THE RISK OF OUTSOURCING THE IT FUNCTION AT COMPANIES. Risk Governance and Control: Financial Markets & Institutions,Share Market assignment6(3), pp. 12-25.