What is The Stock Market?
The history of the stock market can be trashed back to the early 12th century. But the credit of building the modern stock market goes to the Dutch. In the 1600s the Dutch East India Company issued shares to the general people and became the first publicly listed company which created a new era of financial revolution. And, today we will discuss this important topic to know how it works. So, today we will discuss each and every detail of this market which will help you to understand the complete “stock market definition”. So, let’s start.
Stock Market Definition
So, it is clear from the above discussion that the stock market refers to a place where securities of publicly listed companies get bought and sold. The companies offer their shares to the public to raise money for their future growth and the public buy those share from the stock exchanges or over-the-counter(OTC). And people are using this market to get higher investment returns. But, the stock market is still a very confusing place for many people as well, so they don’t get the courage to involve in it. But a good and functioning stock market is the backbone of an economy and it helps a lot to develop a country’s economy.
How Does the Stock Market Work?
People have many confusions about how does the stock market work. So, today we will clear those confusions by discussing this thoroughly.
The stock market operates through the number of stock exchanges which connects the buyers with the sellers. For example, the New York Stock Exchange (NYSE) in the US and the Frankfurt Stock Exchange in Germany. The companies list their shares on these exchanges by an IPO which then get sold on the market. And one can track the market movements through the stock indexes.
Like in the usual market the stock market works on the supply and demand policy. The supply and demand of a listed stock help the exchanges to determine better stock value. The traders of the stock market then buy and sell these stocks according to their need generally through an online platform. The stock market has a particular working hour also known as the stock market timings. every country has different stock market timings and the traders are only allowed to trade according to it. The exchanges do all the calculations about the shares getting bought and sold and save it in its database. There are different types of treading methods available in the exchanges a trader can choose those treading options according to their needs.
Now that we know how does the stock market works it’s time to focus on its functions. One must have a complete idea about the functions of the stock market if h/she wants to know about what is the stock market.
Functions of Stock Market
Pricing of Securities: Depending on the supply and demand the stock market helps to decide a particular price of a security.
Providing Liquidity: Because it is visible to everyone on the market it creates a more steady and easy way to buy and sell securities which provides liquidity in the market.
Safety of Transaction: The stock market works in a regulated way which assures the safety of transactions.
Economic Growth: One of the most important functions of the stock market is that it contributes a lot to our economic growth. People can invest money in it and get a good return where the companies can get the essential money for its growth which ultimately leads to a better economy.
These functions of the stock market are really important in our financial system and can’t be neglected if you want to have a complete idea about what is the stock market.
So, in the above discussion, we have thoroughly discussed “what is the stock” market and how it works, which I think is enough to provide you the complete knowledge about it.