Navigating the Financial Sea: An Insight into the Stock Market

Stock Market

Stock market is a place where trading of public limited companies’ shares is executed. Trading of shares mainly aims at setting up capital for the companies by floating them to the worldwide public. Shares are units of ownership to a financial institution or business which earns dividends, and the winnings are apportioned among the stockholders. Shares are mainly of two types, mostly: common stock and preferred stock. The common stock yields the highest return, but at a cost, they are paid last in case the company liquidates when all the creditors are paid. On the other hand, are preferred shares which have a fixed dividend regardless the company makes profits or loss. However, they do not have voting rights like the common shares. Preferred shares are paid first in case of liquidation, and they are callable any time by the company for any reason. The shares are first sold to investors who buy to fund the company, and they form the primary stock market (Bekaert and Marie 186). When these shares are brought to the stock exchange, they fall under a secondary stock market. The secondary stock market allows investors to sell their shares at either, the prevailing price or the agreed price.<\/p>

The Origin of the Stock Market

The stock market began from the Indian when the East India Company, which was a haven of opportunities where the early traders invested. Most investors sailed to India and because of the intense storms, some lost all they had when ships capsized. The losses realized called for investment in others business, and that is how they began to buy shares of other companies. The shares purchased from different companies enabled the investors not to lose all that they had when the risk occurred.<\/p>

Development of Stock Market

The development of the stock market is the improvement of stock market’s ability to meet the economy’s needs as stipulated among the functions of the stock market. The development of the stock market is replicated in the superiority of services which are presented rather than on the size, index performance or liquidity (Pradhan et al. 163). Flooding of money in the market should be avoided to make it most developed and be able to serve the economy in a better position both in size and liquidity. A developed stock market can serve the economy if it has a large scale and greater liquidity.<\/p>

How the Stock Market Works

The stock market works when a company sells its shares through an initial public offering where the prices are set depending on how much the company needs to raise. Trade exchange of shares can take place on the New York Stock Exchange, where investors and traders buy and sell shares. However, the company does not receive shares directly, but only from Initial Public Offering. Buying of shares depends on the rise and fall of shares. Investors buy a basket of stock from various sectors and tend to hold on to them waiting for the value to increase, and they sell them off when they anticipate a fall in their value in the stock market. The volume of shares available on the major exchanges like NASDAQ or NYSE makes it potential for investors to buy and sell at any time.<\/p>

Recent Developments

Recently, the dollar was slightly higher than its major rivals. For instance, the U.S Dollar Index, recorded a positive index of + 0.36%, which was a great degree of the buck’s strength in contradiction of six other exchanges, which edged up about 0.98% to about 89.192 on 12th Feb 2018. On the second week of Feb 2018, there was headway when the European stocks experienced local market log due to best market selloff. The best selloff was as the result of the holidays in China and U.S.<\/p>

The robust improve in the selloff in the U.S was the opposite in German where automaker Daimler AG experienced a fall in shares.<\/p>

Works Cited

Bekaert, Geert, and Marie Hoerova. “The VIX, the variance premium and stock market volatility.” Journal of Econometrics183.2 (2014): 181-192.

Pradhan, Rudra P., et al. ”Causal nexus between economic growth, banking sector development, stock market development, and other macroeconomic variables: The case of ASEAN countries.” Review of Financial Economics 23.4 (2014): 155-173.