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 ar...
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...r and more productive. If you use the same tool improperly and do not maintain it, the tool can be ineffective and even counterproductive. So the idea is to use the stock market in the positive manner, as to avoid such events like the Great Depression. This is not easy because sometimes accidents just happen, and there is nothing that can be done to avoid a catastrophe, but with constant assessment these kinds of things are manageable and even preventable. As you will see depressions and recessions will happen, but the stock market and businesses adopt, and try to avoid doing it again. They do this because it is bad for them and it is bad for us, and nobody likes it when things are going badly. So even though the stock market can be dangerous and costly to the country, it is an effective tool for helping businesses to be successful, which in turn helps all of us.
In October 1929, the United States stock market crashed due to panic selling. This crash started a rippling effect that contributed to a world wide economic crisis called the Great Depression. This crash was such a shock because of the economic expansion of the 1920’s when the Dow Jones average reached an all time high of three hundred eighty one. The year 1928 was a time of optimism and the stock market had become a place where everyday people truly believed that they could become rich. People everywhere were talking about the market and newspapers were reporting stories of ordinary people such as chauffeurs, maids, and teachers making millions off the stock market. People who didn’t have the money bought on margin. The stock market was booming and the excitement about the market caused a lot of over speculation. People ignored the small signs of the impending crash until Black Thursday, October 24, 1929. Four days later the stock market fell again.
It has been said that every good thing must arrive at an end. On account of the Roaring Twenties that end came suddenly and startlingly. It is simple for one to think back upon the monetary circumstance that prompt the accident and disparagement the specialists for not seeing the indications of a potential calamity. Be that as it may, it was not all that simple for them to see such an accident coming. The 1920 's were a blasting decade and stock costs appeared to be at an unfaltering move for an apparently interminable ascent. Numerous elements can be ascribed to the reason for the accident however nobody element can be singled out as the lone reason. The real reasons for the share trading system accident of 1929
The United States signaled a new era after the end of World War I. It was an era of hopefulness when many people invested their money that was under the mattresses at home or in the bank into the stock market. People migrated to the prosperous cities with the hopes of finding much better life. In the 1920s, the stock market reputation did not appear to be a risky investment, until 1929.First noticeable in 1925, the stock market prices began to rise as more people invested their money. During 1925 and 1926, the stock prices vacillated but in 1927, it had an upward trend. The stock market boom had started by 1928. The stock market was no longer a long-term investment because the boom changed the investor’s way of thinking (“The Stock Market Crash of 1929”). The Stock Market Crash of 1929 was a mass hysteria because of people investing without any prior knowledge and the after effects that eventually led to the Great Depression.
A Share Market which is like a Stock Market. The key contrast is that a stock market offers you some assistance with financial purposes like securities, bonds, mutual funds, etc. A Share market just permits exchanging/trading of shares. A Share Market is a place where the shares are either issued or exchanged.
In Conclusion, although the stock market crash created a terrible place in american history, the crash also strengthened the nation for the future. The government was now regulating the market, and put in new legislation for future depressions, or recessions. After these pieces such as the glass steagall banking act were recalled, history repeated itself, as the stock market once again had a similar fall in 2008. With these regulations in place, the stock market, and the economy could be much more secure for future decades. The Stock Market Crash of 1929 should be an example for the future, showing that history in fact repeats itself.
In answering the question on discussion whether it is important for stock markets to be efficient in order to fulfil its roles, it is important to discuss the roles and the functions of the stock market and why it is important for the stock market to be efficient in order to be able to operate and to perform its role as an efficient allocator of resources.. Secondly it is essential to look at the concept of capital market efficiency and what it means. Clearly, market efficiency is a concept that is controversial and attracts strong views, partly because of the differences in the way individuals explains the concept, and partly because it is believed that it determines how an investor will approach an investment. Finally discuss the types of efficiency and whether it’s only important for the stock market to be allocative efficiency in order to operate or they are other types of efficiency which also help the stock market to fulfil its roles.
In the 1920s, it seemed as if the stock market was the safest and easiest way of gaining money. When people heard of this, they started to purchase stocks as well, but by stock speculation. Stock speculation was the purchasing of stocks without any knowledge of the company’s financial situation, meaning people just assumed that every stock would give them a profit. To make matters worse, banks began loaning out money to investors, in order for them to purchase stocks. Soon enough, in early 1929, banks were receiving many warnings about loaning too much money. However, this did not pose a real threat to banks or investors, for they thought that the stock market was just going to keep on going up. Unfortunately, this was not the
Investors on Wall Street remembered October 24, 1929 as the day that the Stock Market plummeted. In just one day, 12,894,650 shares of stock were bought by investors in frantic hopes of stabilizing the market and avoiding bankruptcy. A week later, the New York Stock Exchange suffered another devastating loss, on what has been dubbed ‘Black Monday’. The total number of stock trades had mounted to 16,410,030 shares, setting off a financial panic that would soon sweep the nation (DeGrace). Wall Street, which had once stood as a national beacon of pride, had lost 50 percent of its value by the end of 1929. Although the market experienced a steady decline at the beginning of 1929, there was an expectation that stock prices would continue to boom as they did throughout the 20s (DeGrace). The sharp drop in stock prices came as a shock to most informed
The stock market is a centralized area where buyers and sellers comes together to perform stock transaction. When one thinks of the stock market, the first thing comes to mind is Wall Street which is sometimes referred to as the New York Stock Exchange as well as the NYSE.
By 1928 stocks became the most common conversation topic everywhere. It did not take long for stock market trading to go wild. More than two million people began investing in the stock market. Yet only a few studied the finances and businesses of the companies that they invested in. Houses were mortgaged and life savings were invested in the stock market without knowing that the stock prices may drop (Mack). In the new investors’ experience, stock market had always gone up. However, weaknesses, such as overproduction of farms, overconfidence, bank failures, fraudulent companies, and low wages, soon proved the investors wrong. After stock price peaked on September 3, 1929, it began to sink and gradually picked up its falling speed. As the price dropped, more brokerages hiked margins, and “it was like yelling fire in a packed theater (Colombo).” Described as the nail in the coffin, Black Tuesday, October 29, 1929, was the most devastating day. The index fell 43 points and 4 to 5 times of the normal shares traded hands. Throughout the remaining of the year, investors lost $100 billion in assets (Williamson). The gradually built Great Crash had severe consequences on global economy and society. The following paper is going to discuss the causes of the stock market crash of 1929. People’s overconfidence led to the United States’ stock market crash in 1929 by ignoring the warning
The stock market is a volatile, unforgiving battleground where fortunes can be made and lost within minutes. The first major stock exchange in the United States, The New York Stock Exchange (NYSE), dates back to 1792 when it acquired its first securities. Since then, the stock sarket has reached an astronomical size, with a market volume of over twenty trillion dollars. This success is not without its setbacks, though. The stock market crashes of 1929 and 2008 have single-handedly led to the worst economic recessions America has ever seen. Considering the sharp ramifications of a market crash, it is important to understand why
During the 1920s, approximately 20 million Americans took advantage of post-war prosperity by purchasing shares of stock in various securities exchanges. When the stock market crashed in 1929, the fortunes of many investors were lost. In addition, banks lost great sums of money in the Crash because they had invested heavily in the markets. When people feared their banks might not be able to pay back the money that depositors had in their accounts, a “run” on the banking system caused many bank failures. After the crash, public confidence in the market and the economy fell sharply. In response, Congress held hearings to identify the problems and look for solutions; the answer was found in the new SEC. The Commission was established in 1934 to enforce new securities laws that were passed with the Securities Act of 1933 and the Securities Exchange Act of 1934. The two new laws stated that “Companies publicly offering securities must tell the public the truth about their businesses, the securities they are selling and the risks involved in the investing.” Secondly, “People who sell and trade securities must treat investors fairly and honestly, putting investors’ interests first.”2
What is the stock market? Businesses share part of the company by selling stock, or shares of ownership. When investors own shares of a company, that company is considered public because the general public has an ownership stake in that company. At the high ranks of the companies are the board of directors, whose job it is to make sure the business’s managers are working in the best interests of the multiple owners and shareholders. Companies sell shares so they can expand their businesses and make them better, such as by building manufacturing plants, buying other companies, and developing new and improved products to keep their business profitable. America’s railroads, steel manufacturers, car companies, and telephone companies all started with the help of money from opening up their business to the Stock Market. The Stock Market started in the 1920’s. People who were smart enough to buy them back then could build up a fortune since the market was growing so rapidly. One wh...
The stock market is an essential part of a free-market economy, such as America’s. This is because it provides companies the capital they need in exchange for giving away small parts of ownership in their company to investors. The stock market works by letting different companies sell stocks to gain capital, meaning they sell shares of their company through an exchange system in order to make more money. Stocks represent a small amount of ownership in a company. The more stocks a person owns, the more ownership they have of that company. Stocks also represent shares in a company, which are equal parts in which the company’s capital is divided, entitling a shareholder to a portion of the company’s profits. Lastly, all of the buying and selling of stocks happens at an exchange. An exchange is a system or market in which stocks can be bought and sold within or between countries. All of these aspects together create the stock market.
At times, the term "market" is used to refer to more strict exchanges. That is, organizations that aid the trade in financial securities for instance, a commodity or stock exchange. It may also be an electronic system (like NASDAQ) or a physical place (like the NYSE, BSE, NSE). Trading of stocks occurs mostly on an exchange. However, corporate actions like merger or spinoff are occur away from the exchange. In addition, any two people or companies, for of any kind reason, may decide to sell stock bet...