Stock market

Quick definition

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James Knight

James is the Editor of Education for Invezz, where he covers topics from across the financial world, from the stock market, to cryptocurrency, to macroeconomic markets.... read more.

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Prash is a financial writer for Invezz covering FX, the stock market and investing. For over a decade he has traded spot FX full time while... read more.

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3 min read

The stock market is a network where investors buy and sell shares of publicly-traded companies.

Key details

• The stock market provides a platform where shares of publicly-listed companies are bought and sold by investors
• Stock prices are determined based on supply (sellers) and demand (buyers), reflecting the market’s perception of a company’s value
• The overall performance of a stock market is often viewed as an indicator of the economic health and business environment of a country or region

What is the stock market?

The stock market is like a vast supermarket for buying and selling shares of companies. Think of it as an online marketplace where people can invest in various businesses by purchasing small parts of them, known as stocks or shares.

When you buy a stock, you’re essentially owning a tiny piece of that company. The stock market reflects the collective actions of all its investors, showing how they value these companies based on current information and future expectations.

How does the stock market work?

The stock market operates through a network of exchanges, like the New York Stock Exchange or the NASDAQ. Companies list their shares on these exchanges through a process called an Initial Public Offering (IPO). Investors then buy and sell these shares among themselves.

The prices of stocks fluctuate based on supply and demand: if more people want to buy a stock (demand) than sell it (supply), then the price moves up. Conversely, if more people want to sell a stock than buy it, the price falls. This trading is facilitated by brokers, who are like agents connecting buyers and sellers.

How is a stock market different from a stock exchange?

The stock market is a broad term that refers to the collection of markets and exchanges where regular activities of buying, selling, and issuance of shares of publicly-held companies occur.

A stock exchange, on the other hand, is a specific location or platform where stocks are traded. It’s a part of the overall stock market. For example, the New York Stock Exchange (NYSE) is a stock exchange, while the stock market refers to the entire activity of all such exchanges globally.

What are some famous examples of stock markets around the world?

Here are a few examples of famous stock markets around the world:

• New York Stock Exchange (NYSE): Located in the United States, it’s one of the largest stock exchanges in the world.
• NASDAQ: Also based in the United States, known for its high concentration of technology companies.
• London Stock Exchange (LSE): A leading global stock exchange located in the United Kingdom.
• Tokyo Stock Exchange (TSE): The largest stock exchange in Japan, known for its influence in the Asian markets.
• Shanghai Stock Exchange (SSE): One of the largest in Asia, located in China.