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A Study Of The American Stock Market

1757 words - 8 pages

The history of stock markets or exchanges is long and complex, and dates back before the birth of America. Early records of stock markets go clear back to the 1600’s when it consisted mostly of spice trades and shipping. The stock markets as we know them today are much different of course, and that is because of their vast ability to facilitate business all over the world. The American stock market, which we will be focusing on, was adapted from the English stock market, which during the early years was the biggest of all markets. Not until America won its independence was a stock exchange considered in the new world. Since its inception the American stock exchange has played a vital role in the success of this country, while at the same time also causing some unforeseen and devastating problems for both the businesses involved and the country and world as a whole. An analysis of the stock market throughout history will reveal that the stock market can be dangerous and costly to the country, but is still effective tool for helping businesses to be successful. Before jumping right into it let us first discuss what a stock market or exchange is and what it does for us.
According to Investopedia.com the stock market is defined as, “The market in which shares are issued and traded either through exchanges or over-the-counter markets. Also known as the equity market, it is one of the most vital areas of a market economy as it provides companies with access to capital and investors with a slice of ownership in the company and the potential of gains based on the company's future performance” (Investopedia.com). This is a great initial overview of how a stock market functions and why stock markets are important for companies. Shares are simply a unit of ownership in a company or financial asset, so if I owned a business and sold half of it to an investor they would own 50% of the company’s shares. This is done mostly so that the business can have access to more capital, which they will use to invest in the company, and in turn help the business to continue to grow. This also allows for the investors to make money by receiving dividends or selling the shares. Investing is not a for sure way to make money because the shares the investor buys value has to either go up, in which case they could sell the share for profit or hold on to it and receive a dividend. On the other hand the share could go down and the shareholder will not receive dividends and will lose money selling the share on the open market. So the stock market can be a double edge sword, it can help or hurt the economy, which we will find out more about.
Now that we know a little about what a stock market is let us learn more about its origin and why it was established in the first place. The first Secretary of the State, Alexander Hamilton, founded and established the first stock exchange in America. He established the stock exchange because the new U.S. government did not have the funds...

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