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What Constitutes an Investment Activity?

Original post by Geri Terzo of Demand Media

Investment activity occurs across many asset classes, including stocks, bonds and commodities.

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.

Volume

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.

Holidays

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.

Deals

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.

                   

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About the Author

Geri Terzo is a business writer with over 15 years experience reporting on Wall Street. Her coverage ranges from institutional investing, including hedge funds and investment banking, to family topics and her career experience includes work for Fox Business, CNBC and "IDD Magazine." Terzo is a graduate of Campbell University, where she earned a B.A. in mass communication.

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