A stock market, also called a stock exchange, is a market for buying and selling stocks. The New York Stock Exchange (NYSE), founded in 1792, is the largest and most active stock market in the world. Other major markets are located in London, England; Hong Kong; Tokyo, Japan; Mumbai, India; and the European Union.

Stocks, or shares, represent ownership of a small part of a company. Not every company sells its shares. Companies that offer stock for sale are called public companies. A public company can raise money through the sale of shares. In return the stockholders gain a share of the company’s future profits and a voice in how the company will be run. As traders buy and sell stocks, their value rises or falls.

At times, a large number of stocks drop suddenly in value, creating a stock market crash. The most famous stock market crash occurred in October of 1929, and precipitated the worldwide Great Depression. October 29, 1929, “Black Tuesday,” was the last of several days of rapidly falling prices. During four days of trading, the market dropped by 25%. Leading up to the crash, the market had climbed to previously unknown levels. Many investors bought stocks using borrowed money or credit; when the stocks lost their value, the investors could not repay the loans. These bad debts worsened the Depression.

A less disastrous but even more drastic crash took place in October of 1987. By then, widespread computer trading carried on at electronic speeds affected the movement of the markets, and the NYSE’s value plunged by 22 percent. Other markets around the world sustained similar losses.

Even now, financial experts do not fully agree on the causes of stock market crashes. Some often-mentioned factors include computer trading, threats of war, lack of adequate regulation on trading, and human panic. However, stock exchanges have created regulations and technical solutions to prevent such drastic rapid losses from recurring.

 

Stock Market

The floor of the New York Stock Exchange is one of the busiest and most hectic business locations in the United States. Traders are constantly on the lookout for fluctuating prices and news that may impact the value of stocks. 

depression
Noun

period of economic hardship, when employment and wages are low, and the value of businesses declines.

investor
Noun

a person or organization that gives money in order to gain a future advantage.

loan
Noun

money, goods, or services given to a person or organization with the intention that the person or organization will return it.

regulation
Noun

rule or law.

stock
Noun

share in a company or business.

Noun

place where partial ownership of companies, goods, and services (stocks, bonds, and securities) are bought and sold.

trading center
Noun

settlement or business area where goods and services are exchanged.