Investment activity can be individual trades that occur when investors buy and sell financial securities. It can also represent the financial markets more collectively trading in an upward or downward direction. The pace at which deals occur in the equity and debt capital markets, such as initial public offerings or mergers and acquisitions, is affected by investment activity.
Investment activity occurs in the stock market when investors buy and sell equity securities. When volume is high, there is a significant amount of investment activity underway. Volume is measured in individual stocks and also for trading activity that occurs on major stock exchanges. In 2009, Citigroup set a new record when trading volume for a single session surpassed that of any other individual stock listed on the New York Stock Exchange.
The debt markets are where bonds are traded. Investment activity is affected by factors such as interest rates and investors' tolerance for risk. In some cases, weak investment activity is due to nothing more than the holiday season. In the U.S., some of the lightest periods for trading in the bond markets are around the Christmas holiday and the days leading up to Labor Day. On a single trading session in late August in 2011, only a pair of high-quality bonds issued by companies traded.
Investment activity influences the deal flow in the financial markets. When much of the investment activity in the stock market is selling, for instance, fewer companies are convinced to issue equity shares in the public markets for the first time in an initial public offering. In 2008, when the world's economy was caught in a recession, the number of IPOs issued around the world through November of that year was the weakest it had been in more than a decade. Companies were delaying or canceling IPOs altogether.
Mergers and Acquisitions
Mergers and acquisitions (M&A) represent investment activity because one company is typically buying another. M&A deals also have a tendency to inspire greater investment activity among individuals and institutions in the stock market. In August 2011, several deals, including a multibillion dollar transaction between Google and Motorola Mobility, were responsible for sending the stock market higher by nearly 2 percent in a single trading session.
- Reuters; Citigroup Shares Break NYSE One-Day Volume Record; August 2009
- "The Wall Street Journal"; Credit Markets: Limited Activity Ahead Of U.S. Labor Day Holiday; August 2011
- "The New York Times"; Global I.P.O Activity Hits 13-Year Low; December 2008
- CNNMoney; 'Merger Monday' Boosts Dow 214 Points; Hibah Yousuf, et al; August 2011
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