The Stock Market
The Market. You hear and see the term in the financial news every day. Your parents may even talk about it. But do you know what it really means?
Without getting into a precise definition, the phrase “the market” usually refers to the stock market. When people ask about the condition of the market, they are asking whether prices of stocks are generally increasing or decreasing.
Knowing that the market exists is one thing, but knowing how to measure the health of the market is another. In the U.S. economy, experts have come up with ways to measure the market. In this section, we will discuss the marketplace where stocks are bought and sold, and the various measures that investors use to tell how the market is doing.
Where Stock Is Bought and Sold
Stockbrokers trade (in other words, buy and sell) stock through exchanges – institutions such as the New York Stock Exchange (NYSE) and the National Association of Securities Dealers Automated Quotation System (NASDAQ). Each of these exchanges has its own rules and regulations that govern which companies can be listed on them.
Launched in 1817, the NYSE lists some of the biggest companies in the United States. The American Stock Exchange, which was launched in 1842 and was commonly viewed as the younger sibling of the NYSE, merged with the NYSE in 2008. NASDAQ was started in 1971 as the exchange for smaller companies, but it has grown to include some of the biggest technology companies in the United States.
You don’t have to know whether a stock is traded on the NYSE or NASDAQ when you buy or sell shares. Your stockbroker or your online broker will simply buy the shares for you – they are the ones who have to know where to go.
At the end of each day, these exchanges record what is known as closing prices for each stock. Closing prices are generally the last price during the day at which the stock was bought or sold. The closing prices in these exchanges are often used to tell how the stock market is doing.