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The Stock market and modern economy

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Introduction

Stock market It is very interesting when we look at stock market and modern economy, and how they operate despite a changing environment. To my understanding, stock and stock exchange is the very key and visible part of our modern economy or so called capitalist system. To trace and take a close look at the issue help substantially in understanding terms such as "production", "profitability", "price", "dividend", as well as "trade or exchange of shares on stock market". One: Initiation or evolution of stock market Well, we all know that stock market or stock exchange is a place where people trade shares of those listed companies. Initiation of stock exchange can be traced back a century ago, along with the rapid development of capital expansion and market economy. Assets of companies with limited liabilities are usually divided into a certain number of "shares". People who do not engaged in daily management of companies may also "own" a portion or part of a company in the form of holding its shares or stocks. ...read more.

Middle

Lessons from stock exchanges in less developed nations are considerably noticeable. Policies adopted by those authorities are either over regulated that market is much constraint in development or "policy dominated", or big players may manipulate market prices when regulations are less effective. 2. Share issuance. As a company with limited liability, is it possible to issue shares and raise funds? Well, theoretically it is possible, yet depending on different prerequisites. General speaking, the following criteria must be met by potential issuers: a. Be profitable for the last 3 consecutive years; b. Profit margin must be over certain percentage; c. Committed to industries that is not against public interests or should be encouraged by government; d. Economic scale of the company should be over certain benchmark; e. Well established and structured; f. The overall capacity of stock exchange; g. Queuing up for a proper timing and approval. h. Other criteria considered necessary by authorities. Why do they post all these conditions for potential issuers? The answer is simple: to protect the interests of investors and a healthy or steady performance of economy. ...read more.

Conclusion

It has many things to do with economic policies, business cycles, speculating psychology, economic development trend, purchasing power, supply and demand, and many others. That's why economists build up so many mathematic models, in trying to understand and summarizing the behavior of stock markets. Yet few of them have proved to be successful. Helpless people have to acknowledge the fact that stock market is, after all, irrational. Three: The world's most important stock exchanges The world's most important stock exchange include London, New York, Tokyo, Frankfurt, Hong Kong and Singapore. Capitalization in these markets occupies a dominant portion of global business turnover. There is no exception that world most famous corporations are listed on above said markets. Thousands of billions of dollars are traded each day through highly advanced and sophisticated telecommunication systems. A cough by these markets would result in serious flu in world's economy. Legendary stories are told that millions of people are getting a big fortune by speculating stock prices, while other numerous people are getting bankrupted. It is a two sided sword that must be carefully watched, but we can't imagine a world without stock markets. ...read more.

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