What is a stock market?

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A **stock market** is a platform where individuals and institutions can buy, sell, and trade shares of publicly listed companies. It serves as a marketplace that connects buyers and sellers of stocks, which represent ownership in a company. When you buy a share, you're essentially purchasing a small part of that company and may benefit from its profits in the form of dividends or by selling the shares later at a higher price. ### Key Functions of the Stock Market: 1. **Capital Raising for Companies**: Companies issue shares to raise capital for expansion or other business needs. Investors who purchase these shares provide that capital. 2. **Investment Opportunities for Individuals**: Investors can buy shares to potentially earn returns through price appreciation or dividends. 3. **Liquidity**: Stock markets provide liquidity by allowing shares to be easily bought and sold. 4. **Price Discovery**: The stock market helps determine the fair price of a company's shares based on supply and demand dynamics. ### Main Components of the Stock Market: - **Primary Market**: Where new shares are issued via initial public offerings (IPOs). - **Secondary Market**: Where investors trade previously issued stocks. Stock markets are essential to the functioning of modern economies, promoting investment and growth. Major stock exchanges include the **New York Stock Exchange (NYSE)**, **NASDAQ**, and the **London Stock Exchange (LSE)**. read less