Define The Stock Market

The Stock Market is a market for the trading ofand uneven. Moreover, unforeseen risks, or
company stocks, and the likes of the same. Incatastrophic risks are a good example of the
Stock Market both of these are securities listedcomplete collapse of the financial system or
on a stock exchange as well as those that aregovernment institutions in the market, which
only traded privately.cannot be capable of being spread, or insured
Though it may seem common, the term Stockagainst.
Market is a somewhat abstract concept for theThe smooth functioning of all these activities and
mechanism that enables the trading of companyfacilitates in the Stock Market give economic
stocks. It is usually also used to describe thegrowth and the lower costs and enterprise risks
totality of all stocks in the market and indeedpromote the production of goods and services as
other securities, with the exception of bonds,well as employment. In this way the financial
commodities, and derivatives.system contributes to increased prosperity.
The term market is used especially to applyThe market is one of the primary most
within one country as, to put up with within theimportant sources for companies to raise money.
phrase "the Stock Market was up today", orPrior experience has shown that the price of
within the term " Stock Market bubble". Bonds areshares and other assets is an influential part of
still traditionally traded in an informal,the dynamics of economic growth. The
over-the-counter market known as the bondcontinuously rising share prices tend to be
market.associated with increased business investment and
Commodities are usually traded in commoditiesvice versa in the Stock Market.
markets, and derivatives are traded in a varietyShare prices also affect the wealth of households
of markets but like bonds, mostlyand their consumption. Thus, central banks tend
'over-the-counter'. The size of the worldwideto keep a bull's eye on the magnificent control
'bond market' is estimated at $45 Trillion and theand behavior of the market.
size of the Stock Market is estimated as aboutRelation Of The Stock Market To The Modern
half that.Financial System
It must be noted though that the derivativesIn the market the financial system in most
market, because it is stated in terms of notionalwestern countries has undergone a remarkable
outstanding amounts, cannot be directly comparedtransformation. One main feature of this progress
to a stock or fixed income market, which refersis disinterring mediation. A portion of the funds
to the actual value in a market.involved in saving and financing flows directly to
The Stock Market is distinct from a stockthe financial markets instead of being routed via
exchange, which can be said to be an entity, saybanks' long-established lending and deposit
a corporation or a mutual organizationoperations.
countenance within the business of bringing peopleThe general public's heightened interest in investing
and sellers of stocks and securities together.trait within the Stock Market, either directly or
Here, the case in point-Stock Market-within thethrough mutual funds, has been an important
United States includes the trading of all securitiescomponent of this process.
listed on the splendid NYSE, the NASDAQ, theThe statistics related to the market show that in
Amex, as well as resting on the many regionalmany countries in the recent decades shares
exchanges, the OTCBB, and Pink Sheets.have made up an increasingly large proportion of
European examples of stock exchanges includehouseholds' financial assets. A feature in the
the Paris Bourse (now part of Euro next), themarket within the 1970s, in Sweden, deposit
London Stock Exchange and the Deutsche Borse.accounts and other very liquid assets with little
Importance Of Marketrisk made up almost 60 per cent of households'
The importance of Stock Market can befinancial wealth, as against less than 20 per cent
understood when it's most imperative networkswithin the 2000s.
for transport, electricity and telecommunicationsThe major part of this adjustment in financial
function properly. Thus, it is essential that, inportfolios has gone directly to shares but a
market payments can be transacted, capital canbargain now takes the form of various kinds of
be saved and channeled to the most profitableinstitutional investment for groups of people. As
investment projects and that both households andexamples in the Stock Market the pension funds,
firms obtain help in handling financial uncertaintymutual funds, hedge funds, insurance investment
and risk as well as possibilities of spreadingof premiums, and so on, the list goes on. The
consumption over time.trend towards forms of saving with a higher risk
The financial markets constitute an important parthas been accentuated by new rules for most
of the total infrastructure for every single societyfunds and insurance, permitting a higher proportion
that has passed the stage of largely domesticof shares to bonds.
economies.Thus, in a Stock Market similar tendencies are to
The Financial System Of The Market Performsbe related in other industrialized countries. In all
Three Main Tasks:developed economic systems, like the European
1) It handles transfer of payments in theUnion, the United States, Japan and other first
markets.world countries, the trend has been the
2) It channels savings to investments with a goodsame-saving has moved away from well
return for future consumption in the Stockestablished (government insured) bank deposits to
Market.more risky securities of one sort or another.
3) It spreads and reduces the economic risks inLastly, any type of a dealing in the Stock Market
relation to the players' targeted returns.should be given a serious thought and then only
Here also note that systemic risk is not therebyto be proceeded.
reduced, it merely becomes less concentrated