Stock Markets

What are stock markets?

The basic purpose of a stock market is to enable companies to raise money by selling shares in their ownership. A share, also known as stock or equity, is therefore a small piece of ownership in a company. The price of a share generally reflects what people think the prospects of a company are going to be in the future.

Let’s say the NICE clothing company wants to expand its business and open more branches, but it doesn’t have enough money to do this. The company could borrow money, or, it could choose to give away portions, or shares, of its company in return for the cash it needs by listing on a stock exchange. This means that information about its activities becomes public, and anyone can buy or sell its shares. If many people think the NICE company will do well in the future and they buy shares, this could cause the NICE share price to rise.

There are many stock markets around the world, some of the most famous ones include the New York Stock Exchange and the London Stock Exchange. The combined share prices of the largest companies listed on a certain exchange are sometimes represented by a stock index, like the Dow Jones-30 or the FTSE-100. If the share prices of the big companies in an index go up, so can the value of the index itself.