Stock Market and Stock Exchanges

By Vihaan Kohli

Stock Market

What is a stock market?

A stock market is a market where company stock is traded between people who want to buy the stock and people who want to sell stock. Just the same as a fish market where people want to buy and sell fish or a cattle market where cows are exchanged between buyers and sellers. Stock is just a slice of a company/organisation, if you own over 50% of the stock then you own a company.A stock market is made up of several components of which we will be seeing the major components in the next few slides…

Stock Exchanges

Stock Exchanges

Stock exchanges are key companies that allow the stock market to work as efficiently as it does. They list shares prices for thousands of companies, they list the bid/ask prices of shares and enable quick electronic transfers of shares between people. Some stock exchanges you might have heard of include LSE (London stock exchange) and the NYSE (New York stock exchange).Companies are vital for a stock market to work! A company must be listed as a PLC (public listed company) for people to trade it’s shares at a stock market. To be listed as a PLC a company must meet strict financial requirements.

Shares

What are Shares?

A unit of ownership that represents an equal proportion of a company's capital. It entitles its holder (the shareholder) to an equal claim on the company's profits and an equal obligation for the company's debts and losses.

Why do shares exist?

Shares are issued by a company to raise money (capital) to help plan for future projects or because the owner/s of the company want a big lump sum of money for themselves as a reward for the hard work they have put into building up the company!

Stock Market Brokerages

Stock market brokerages

Brokers are the middle men between the stock exchange and the stock buyer. They fetch the buy and sell prices of stocks from the stock exchange and relay them to the purchasers. It is a legal requirement that you open a brokerage account to buy or sell stocks.

Why do stock prices move up and down?

A share price goes upwhen…

•A company is making huge profits.•Lots of people want to buy the shares to reap the rewards of the profits.•Not many people want to sell the shares.•There are not many shares left.

A share price goes down when…

•A company makes some losses.•Lots of people want to sell the shares.•Not many people want to buy the shares.•There are too many shares.

However there are several external factors that affect a company’s stock price. One factor that we have all witnessed recently is the recession. Others include inflation rates, interest rates, job cuts, natural disasters, company mergers, changes in company