What is the World Stock Market?

The world stock market is the multitude of markets and exchanges that exist worldwide, where the issuing and trading of equities or stocks of publicly held companies, bonds, and other classes of securities take place. These trades can be made either through formal exchanges or over-the-counter (OTC) marketplaces or traded as CFDs.

Another name for the world stock market is simply the equity market. It is one of the most vital components of a free-market economy as it provides companies with access to capital in exchange for giving investors a stake of ownership.

Structure of the Equity Market

Stocks of larger companies are usually traded through stock exchanges, which are located in major cities throughout the world. Some of the most prominent stock exchanges are the New York Stock Exchange (NYSE), founded in 1792 and located on Wall Street, the Nasdaq, founded in 1971, the London Stock Exchange and the Tokyo Stock Exchange based on market capitalization.

The world stock market consists of two sections: the primary market and the secondary market. The primary market is where new issues are sold through initial public offerings (IPOs). The majority of these shares are typically purchased by institutional investors from investment bankers.

The opening price of a company’s IPO stock is usually determined be the worth of the company after going public and the number of shares issued. All subsequent trading happens in the secondary market, where both institutional and individual investors can participate. Once a company’s stock starts trading, it does not receive funds from the buying and selling of its shares.

Trading Stocks on The World Stock Market    

Stock exchanges are entities that bring together buyers and sellers in a centralized environment. On exchanges, stocks are listed and traded. The execution of the majority of transactions on stock exchanges is by electronic means. Stocks themselves are also mostly held in an electronic format rather than as physical certificates.

Stocks can be listed on stock exchange if they meet the listing criteria of the respective exchange. The world stock market allows companies to raise money by offering stock shares and corporate bonds. It lets investors take advantage of the financial performance of the companies, making money through dividends. Investors can also make a profit by selling appreciated stocks. This is known as a capital gain. Thus, creating an environment, where entities, companies, and individuals can rise, invest and make money.