JUN 3, 2020 By : ATHUL RAJEEV, VENTESKRAFT.
An equity market in which shares are issued and traded. Either through exchanges or over-the-counter markets traded. Also known as the stock market trading. It is one of the most vital areas of a market economy because it gives companies access to capital and investors. A slice of ownership in a company with the potential to realize gains based on its future performance.
Equity markets are the meeting point for buyers and sellers of stocks. The securities traded in the equity market can be either be public stocks, which are those listed on the stock exchange, or privately traded stocks. Often, private stocks are traded through dealers, which is the definition of an over the counter market.
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, he or she is buying at market value similarly, when a seller will take any price for the stock, he or she is selling at market value.
Companies sell stocks in order to get capital to grow their businesses. When a company offers stocks on the market, it means the company is publicly traded. And each stock represents a piece of ownership. This appeals to investors, and when a company does well, its investors are rewarded as the value of their stocks rise. The risk comes when a company is not doing well, and its stock value may fall. Stocks can be bought and sold easily and quickly, and the activity surrounding a certain stock impacts its value. For example, when there is high demand to invest in the company, the price of the stock tends to rise, and when many investors want to sell their stocks, the value goes down.
- Equity markets are meeting points for issuers and buyers of stocks in a market economy.
- They are critical for capital formation and allocation in such economies.
- Stocks can be issued in public markets or private markets. Depending on the type of issue, the venue for trading changes.
