Equities market wikipedia
The market in which shares are issued and traded, either through exchanges or over-the-counter markets. Also known as the stock market , it is one of the most vital areas of a market economy because it gives companies access to capital and investors a slice of ownership in a company with the potential to realize gains based on its future performance.
Equity markets are the meeting point for buyers and sellers of stocks. The securities traded in the equity market can be either public stocks, which are those listed on the stock exchange, or privately traded stocks. Often, private stocks are traded through dealers, which is the definition of an over-the-counter market.
The place where stocks in the equity market are traded is the stock exchange. There are many stock exchanges around the world, and they can be either physical places or virtual gathering spots. NASDAQ is an example of a virtual trading post, in which stocks are traded electronically through a network of computers. Electronic stock exchanges often include a market maker , which is a broker-dealer company that both buys and sells stocks in order to facilitate trading for a particular stock.
This comes at a risk to the company, but it makes the exchange process for a given stock operate more smoothly. Electronic trading posts are becoming more common and a preferred method of trading over physical exchanges. The New York Stock Exchange NYSE on Wall Street is a famous example of a physical stock exchange; however, there is also the option to trade in online exchanges from that location, so it is technically a hybrid market.
Capital market - Wikipedia
In a physical exchange, orders are made in open outcry format, which is reminiscent of depictions of Wall Street in the movies: Physical exchanges are made on the trading floor filter through a floor broker , who finds the trading post specialist for that stock to put through the order.
Physical exchanges are still very much human environments, although there are a lot of functions performed by computers. Brokers are paid commissions on the stocks they work. Most large companies have stocks that are listed at multiple stock exchanges throughout the world.
However, companies with stocks in the equity market range from large-scale to small, and traders range from big companies to individual investors. Most buyers and sellers tend to prefer trading at larger exchanges, where there are more options and opportunities than at smaller exchanges.
However, in recent years, there has been an uptick in the number of exchanges through third-party markets, which bypass the commission of a stock exchange, but pose a greater risk of adverse selection and don't guarantee the payment or delivery of the stock.
The oldest existing stock exchange is the Amsterdam Stock Exchange AEX , which was founded in the s to trade stocks of the Dutch East India Trading Company, one of the first companies then called joint-stock companies to offer shareholder stock. Prior to the AEX, many countries and towns had their own systems of trade regulation that operated much like stock exchanges, but the AEX was the first official stock exchange as we know it. Today, equity markets exist in most developed and developing countries.
In the equity market, investors bid for stocks by offering a certain price, and sellers ask for a specific price.
Equities - definition of equities by The Free Dictionary
When these two prices match, a sale occurs. Often, there are many investors bidding on the same stock. When this occurs, the first investor to place the bid is the first to get the stock.
Equity market financial definition of Equity market
When a buyer will pay any price for the stock, he or she is buying at market value ; similarly, when a seller will take any price for the stock, he or she is selling at market value. Companies sell stocks in order to get capital to grow their businesses. When a company offers stocks on the market, it means the company is publicly traded , and each stock represents a piece of ownership.
This appeals to investors, and when a company does well, its investors are rewarded as the value of their stocks rise. The risk comes when a company is not doing well, and its stock value may fall. Stocks can be bought and sold easily and quickly, and the activity surrounding a certain stock impacts its value.
For example, when there is high demand to invest in the company, the price of the stock tends to rise, and when many investors want to sell their stocks, the value goes down.
This market can be split into two main sectors: Stock exchanges, such as NYSE or NASDAQ, are examples of secondary markets. In general, rising stock prices for companies from a particular country indicate a healthy, growing market; on the other hand, a downward trend in stocks may reflect weakening fundamentals in a country's economy. This is because rising prices tend to indicate that many buyers are investing their money in the future health and growth of the economy as a whole.
In the United States, two periods of economic decline were linked to a crash in equity markets: The Great Depression resulted from widespread panic and distrust in the market; people preferred to hide money under their mattresses than hold it in the banks, which caused chaos in the trading world.
The Great Recession, which affected the global market, not just the United States, resulted from a crash in the housing market and an over-reliance on credit. Dictionary Term Of The Day. A measure of what it costs an investment company to operate a mutual fund. Latest Videos PeerStreet Offers New Way to Bet on Housing New to Buying Bitcoin? This Mistake Could Cost You Guides Stock Basics Economics Basics Options Basics Exam Prep Series 7 Exam CFA Level 1 Series 65 Exam.
Sophisticated content for financial advisors around investment strategies, industry trends, and advisor education. Stock Market Exchange Primary Listing Graduated Security Common Stock Regional Stock Exchange Listed Security Listing Requirements Market. Content Library Articles Terms Videos Guides Slideshows FAQs Calculators Chart Advisor Stock Analysis Stock Simulator FXtrader Exam Prep Quizzer Net Worth Calculator.
Work With Investopedia About Us Advertise With Us Write For Us Contact Us Careers. Get Free Newsletters Newsletters. All Rights Reserved Terms Of Use Privacy Policy.