Stock Market Functions And Purpose

Stock markets are also called as equity markets and it is a public market for buying and selling of the derivatives, company stocks at an accepted price, these are called as securities and privately those are traded and these are indexed on a stock exchange.

To raise the money for companies the stock market is one of the best sources. Businesses are allowed by stock market to trade securities publicly and to raise additional capital to expand the business through selling ownership shares of the company in a public market. Stock market offers investors liquidity, means it offer the facility to easily and quickly sell securities. When we compare to other less liquid investments like real estate, it is a best advantage of investing in stock market.

Stock market is an indicator of social mood and assets and price of shares are significant division of economic activity. When stock market is on rise then it is regarded as there is grow in economy, stock market is primary indicator of the country's economy development and strength. Increasing prices shares is symbol of increasing business investment. Wealth of house holds and their consumption are also affected by share prices. So that is why the central banks concentrate on the control over the stock market.

For each transaction, stock exchange be as a clearinghouse like Collecting and delivering the shares are done by stock exchange and guarantee payment of the security to the seller. It removes the counter party risk to buyer and seller.