A stock market is a place where anyone can buy or sell fractional ownership of publicly traded companies. Investors purchase shares of a company to get in on its growth or to receive dividends that can grow their wealth over time. Stock markets also play an important role in the economy by allocating resources to the most productive businesses.
Share prices rise and fall on a daily basis based on the supply of investors who want to buy and the demand from those who are willing to sell. A stock’s price may also be influenced by macroeconomic factors, like inflation or political events.
The most common way for a company to raise funds is through a share offering, when it distributes shares of its business to the public to sell. There are several different types of shares, each with its own unique characteristics that affect the price of a share.
Stock markets are made up of a collection of stock exchanges around the world, which act as central locations where buyers and sellers meet to trade shares. The TSX, NYSE and Nasdaq are examples of major stock exchanges. They are governed by national and international laws that ensure fair trading practices. Stock exchanges also provide transparency in stock prices by showing the best “bid” (the price a buyer wants to pay) and the best “ask” (the price a seller is willing to accept) in real time. This ensures that the highest bid and lowest ask are always visible to participants and keeps the marketplace fair.