The stock market is a key part of modern economies. It’s where companies raise vast sums of money to accelerate successful startups, expand operations and pay off debt. It’s also where high-net-worth individuals and investors with more modest means buy shares in publicly traded businesses, often to take advantage of gains and have a voice in how the company is run.
The earliest days of the stock market began when entrepreneurs raised money by giving parts of their business to friends and family in exchange for capital. This was the first form of private equity. Today, the stock market is a global trading system where stocks are sold and traded through regulated exchanges like the New York Stock Exchange (NYSE) and Nasdaq. Some stocks are also traded “over the counter” through broker-dealers and other financial institutions.
As for how stocks go up and down, it comes down to supply and demand. When demand for a specific stock is greater than the number of shares on offer, its price rises. Factors that drive demand include things like a company’s profitability, news about the economy here and abroad and the general sentiment of investors.
Many investors keep tabs on the market by following indexes that reflect the performance of a group of stocks, such as the Dow Jones Industrial Average or S&P 500. You’ll hear about these indexes on news programs as they report the ups and downs of Wall Street.