The stock also referred to as shares or capital stock, financial statements representing a company or corporation proportional claims of ownership both on its assets and profits generated. On the other hand, the stock market comprises of buyers and sellers of stocks who represent ownership claims on situations such as securities. For instance, the share of a given company sold to investors through equity crowdfunding method; thus shareholders claiming ownership of the portion. Therefore, when the shareholder acquires a specific proportion of the stocks, he or she subsequently owns that part of the company.
History of the Stock Market
Stock markets began operating back in the 12th century in France when trading businesses were conducted without management or regulations, especially in the agricultural industry. As such, one farmer, Van der Beurze, started holding meetings in a building in Antwerp, Belgium, where he also traded his products. In the early 13th century, the idea spread to other regions such as Flanders in Belgium and other countries leading to the opening of similar trading centers in Ghent and Rotterdam.
In mid of the 13th century, trading in government securities began with the Veteran banks adopted the idea, and by 1351, the Veteran government outlawed the initial stock markets. Other financial institutions also accepted the idea and banks in Pisa, Florence and Genoa were the first to allow stocks during the 14th century. Between the 17th and 18th century, the Dutch played a significant role in shaping the current stock market through pioneering of different financial innovations. Over the years, the stock market has undergone multiple changes to align with the modern economies of different countries around the world.
How the Stock Market Works
The stock market operates similarly like buying and selling of any product but requires varying networks of exchanges. It enables buyers and sellers to meet and negotiate prices then involve in trading of shares of a given corporation. However, companies begin by listing their shares to the investors to raise money or grow the business through the stock exchange market. The investors then may buy the stock and then trade the shares between themselves while the exchange tracks the demand and supply for the shares.
The supply and demand exchange tracking enable investors to determine the prices of securities and the competitiveness in the market. Besides, the curves of the exchange rates are typically done through computer algorithms hence generating a given amount for investors and traders when buying a specific share. Therefore, the stock market works similar to that of house auctioning as it also entails bid-ask approach. The bid-ask techniques enable buyers and sellers to agree on a price before the investor becomes the shareholder of the company.
The stock exchange is the transaction conducted in the stock market, where a potential buyer acquires the shares from the seller. The stock market comprises of stocks of both investors and companies as such, the stocks listed on the stock market may become secondary markets listed by shareholders. On the other hand, when buyers decide to sell their shares, they do not sell it directly to the company instead trade to other investors in the stock market. Stock exchanges are sometimes an excellent platform to trade your stocks as the listed corporations are free from buying and selling their shares frequently.
Benefits of Stock Market and Exchanges
The primary function of stock markets is to allow companies to raise money to expand their operations by selling a portion of the company to potential owners. More so, stock markets enable companies in the debt market to trade publicly as the liquidity is much higher, and investors can quickly acquire the securities. The stock market also plays a significant role in determining the economic strength and growth of a country as the rise of stocks indicates a growing economy. Henceforth, the stock market is one of the primary dynamics of a country as it contributes to the social activities of the trading activities.
Another critical role of the stock market is the regulation of the financial systems of a country, especially the western regions, as it impacts business investments significantly. Stock prices variation affects both household wealth and their utilization; hence, central banks ensure keen monitoring of the behavior of the shares. Again, stock markets provide ready liquidity of the stocks held the shareholders as well as listed corporations on the stock exchange list readily have greater visibility to investors. It also allows for a quick decision on stock options for companies to generate plans to attract experienced buyers.
Stock Exchange Behavior
Since the introduction of the stock market in the trading industry, shareholders, buyers, and sellers have experienced many occurrences. Among them is the temporary alteration of stock prices by investors leading to increased rates of shares or excessive pessimism resulting in low prices. Another similar case is stock market crashes that have seen investors lose billions of dollars in a sharp decline in prices. The first great stock market crash occurred on October 24, 1929, seeing the Dow Jones losing up to fifty percent with other crashes occurring later on in the coming years.
The stock market exchange listing may also comprise of significant detriments, including strict regulations imposed by the government, increased costs of listing and many investors prefer short-term approaches rather than focusing on long term investment strategies. Besides, the stock market may sometimes react irrationally to the economy or other related financial institution news hence impacting on different elements, especially prices. More so, sudden changes in market events may result in the inadequate prediction of the stock market, therefore, leading to losses to both investors and corporations.
Stock Market Prediction and Index
Stock market analysts utilize trading strategies and focusing on search volume information to provide a market analysis of the trends of stocks in the future. Through Google Trends, the analysts suggest that the rise in financial searches indicates that there is a significant loses in the financial market in the future. The prediction is based on Google searches primarily on economic relevance. While stock market indices capture the variation of prices in the market, therefore, enables investors in market capitalization. Some of the indexes include FTSE, which provides buyers the benefit of determining the best stock to acquire and increase profits.