The stock market is where investors buy and sell shares in public companies. It’s a central part of modern economies because it lets companies raise vast sums of money to accelerate successful startups, expand operations and pay off debt. Shares represent a part ownership of a company, and profits or losses remain with the shareholder. The first modern stock exchanges were established in Europe in the 1600s, allowing people to trade their shares in an open “secondary” market. Today, the stock market is conducted largely on computers operating at lightning speed to match many buyers and sellers who want to buy or sell shares at a given price.
Investors in the stock market include individual retail investors, institutional investors (e.g. pension funds, mutual funds, insurance companies), and robo-advisors that automate investing for individuals. Private companies don’t have a public stock market; instead, they typically issue shares to employees or to venture capital firms.
A key feature of the stock market is transparency: Publicly traded companies must follow stringent reporting regulations to keep shareholders informed. This helps maintain confidence in the market and keeps it a useful tool for raising large amounts of money for new companies and global expansion. The ups and downs of specific stocks are reported daily in the news, and indices like the Dow Jones Industrial Average or S&P 500 give a picture of the overall health of the market. Various factors affect market behavior, including macroeconomic events such as interest rates or inflation, and political and natural disasters.