The History of the Stock Market
In the beginning, there was no real stock market. However stock exchanges did take place in smaller groups and corporations. This all took place during the 1700's where stocks were already around for a long time before that but it wasn't really popular in the United States. Stocks originally started as auctions where traders called out names of companies and the shares available. There was a auction that took place and the shares went to the highest bidders.
After the American Revolution which took place between 1775 to 1783 the number of securities increased dramatically. The amount of shares being bought grew so large that brokers had to organize in order to handle the growing volume. In 1800 the Philadelphia Board of Brokers set up rules and central offices where trading could take place. They created the Philadelphia Stock Exchange which is the oldest stock exchange in the United States. In 1817, New York brokers created the New York Stock and Exchange Board which was later renamed to the New York Stock Exchange in 1863.
The United States grew and prospered during the 19th century and more and more companies issued stocks and bonds. More and more people began to invest and many stock exchanges were created all around the country. However, few companies held on and eventually broke up due to other exchanges getting bigger. One of the most popular exchanges in the world today is the New York Stock Exchange. It is one of the oldest exchanges in the United States formed about 20 years or so after the Philadelphia Stock Exchange. One of the short lived companies were the small exchanges formed during the California Gold Rush of 1849. There gave birth to many small exchanges where the public could buy stocks and shares in the mining companies. It flourished for a while until the gold rush ended where the companies went out of business and all trading and exchanges stopped.
During the 2nd half of the 19th century New York City became the central financial center of the United States. After that the New York Stock Exchange became the number one trading center. The reason for this being that its members focused on buying securities of larger corporations. At that time all the smaller stocks of smaller companies were handled on the streets of downtown New York City. In 1908 these brokers formed the New York Curb Agency which is now known as the American Stock Exchange. It was renamed to this in 1953.
During the 1920's millions of Americans began investing in stocks for the first time. They heard about how rich people were getting by investing so they all decided to do it. Many new investors entered the stock market using borrowed money. Stock market prices rose steadily as inflated market demand outpaced increases in the capital value of businesses. Investors began to realize that a large imbalance existed between stock prices and the amount of money needed to back them up, and began to sell. On...