Stock Market

Financial Dictionary -> Investing -> Stock Market

A stock market or stock exchange is publicly open market where stocks, shares and derivatives in publicly traded companies are bought and sold. Its main purpose is to allow public companies, governments, local authorities and other entities (depending on which market) to raise capital for their business, by allowing the public a chance to share in its ownership and future wealth.

The stock market will not only supervise the issuing of shares by a company, but also acts as a second hand market place for those trading in shares they have previously bought. Unlike other markets shares do not lose value as they get older because they are only representative of a stake in a company. The share itself isn't useful like a loaf of bread for example. Shares however do fluctuate in value depending on public perception and company performance.

To buy shares on the stock market, whether you choose the New York Stock Exchange or the London Stock Exchange, usually requires a stock broker or some kind of middle man that can set you up a trading account and do the buying and selling for you. They will charge a fee for this service. Due to the internet online trading is now commonplace.

The more traditional way to purchase shares would be to go to the location of the stock exchange and interact with the stock brokers on the trading floor.

Going by 2008 data the valuated size of the entire world's stock market is about $36.6 trillion US dollar equivalent. The United States itself is one of the larger contributors, including the trade of all the securities listed on the NYSE Euronext, the Amex and the NASDAQ indexes, as well as many smaller regional exchanges.

The word stock market simply developed out of the traditional use of the word market, where traders would gather to sell and exchange goods.