A stock is a term used to refer to an investor’s shares or ownership percentage in a company. The investors with shares are referred to as shareholders or stockholders. A shareholder owns a particular fixed percentage of everything owned by the company. The profit obtained by the company is used to determine whether the stock will be sold at a higher or lower price. Therefore, a stock market of an aggregation of buyers and sellers of stocks or shares which include the securities listed at the public stock exchange or private equities.
The size of a business can be measured by the price of one share of their stock, multiplied by the number of shares of stock. This measurement is called market capitalization. Stocks can be categorized in several ways including by country where the company is domicile. As of 2017, the world stock market is valued at US$76.3 trillion.
History of the Stock Market
The invention of the stock market cannot be credited to one single person. It was gradually invented and grown to what it is today by several ideologies and partnerships of different businesspeople.
A genuine stock market started way in the 1500s when the countries in the western world began engaging in business activities with each other. During this period, pioneer business moguls had the urge to put up huge business ventures. They wanted to trade their merchandise with other traders, probably from other countries. The businessmen created a partnership and formed joint-stock companies. Joint-stock companies trace their origin in the Netherlands and came as a solution to the many companies that were making losses. Some of the world's earliest stock markets include the London Stock Exchange and the Amsterdam Stock Exchange.
First Publicly Traded Company
The Dutch East India Company was the first company to issue the first paper shares. The share paper enabled the shareholders to buy and sell their stock shares whenever they wished to do so. However, the earliest form of stock market is recognized to have begun in the 12th century in France when the courretiers de change took over the duty of managing debts of agricultural communities on behalf of the banks and other financial institutions.
As years passed by, the volumes of shares and stock market kept on increasing. A platform to enable the exchange and trading of shares had to be developed. For this reason, stock traders set up a meeting at a coffeehouse in London. The meeting venue was chosen to serve as the market for their shares and stock. In 1773, the merchants eventually took over the coffeehouse and named it “Stock exchange.” With this step, the first stock exchange, the London Stock Exchange was founded in 1801. The idea became widespread in many parts of the world, especially in the American colonies. In 1790, the exchange processes started in Philadelphia.
Why was Stock Market Invented?
The sole purpose of a stock market is to enable business people to acquire a stake in a business or company. They invest into a business venture that was probably collapsing or needed financing and would then be entitled to a particular agreed amount of the profit obtained. It goes a long way in the expansion of business ventures. The stock market has also been an important invention to people with brilliant business ideas but with no enough capital. The rich business people would invest in the idea and obtain shares from it. Stock market is also a significant platform where a company markets itself.
Major Stock Markets of the World
The world's largest stock exchanges include the New York Stock Exchange, NASDAQ, the London Stock Exchange Group, and the Japan Exchange Group. Perhaps the location most synonymous with stock exchanges is Wall Street in New York City.