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Equity Market
An equity market is a market in which shares of companies are issued and traded, either through exchanges or over-the-counter markets. Also known as the stock market, it is one of the most vital areas of a market economy. It gives companies access to capital to grow their business, and investors a piece of ownership in a company with the potential to realize gains in their investment based on the company's future performance.
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Understanding an Equity Market
Equity markets are the meeting point for buyers and sellers of stocks. The securities traded in the equity market can either be public stocks, which are those listed on the stock exchange, or privately traded stocks.
When companies are born they are private companies, and after a certain time, they go through an initial public offering (IPO), which is a process that turns them into public companies traded on a stock exchange. Private stocks operate slightly differently as they are only offered to employees and certain investors.
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Trading in an Equity Market
In the equity market, investors bid for stocks by offering a certain price, and sellers ask for a specific price. When these two prices match, a sale occurs. Often, there are many investors bidding on the same stock. When this occurs, the first investor to place the bid is the first to get the stock. When a buyer will pay any price for the stock, they are buying at market value; similarly, when a seller will take any price for the stock, they are selling at market .
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Stock Exchanges
Stock exchanges can be either physical places or virtual gathering spots. Nasdaq is an example of a virtual trading post, in which stocks are traded electronically through a network of computers. Electronic trading posts are becoming more common and a preferred method of trading over physical exchanges.
The New York Stock Exchange (NYSE) on Wall Street is a famous example of a physical stock exchange; however, there is also the option to trade in online exchanges from that location, so it is technically a hybrid market.
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Stock Exchanges
Stock exchanges can be either physical places or virtual gathering spots. Nasdaq is an example of a virtual trading post, in which stocks are traded electronically through a network of computers. Electronic trading posts are becoming more common and a preferred method of trading over physical exchanges.
The New York Stock Exchange (NYSE) on Wall Street is a famous example of a physical stock exchange; however, there is also the option to trade in online exchanges from that location, so it is technically a hybrid market.
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IDEAS CURATED BY
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