History of Stock Market: Everything to Know How it All Started

History of Stock Market
History of Stock Market Everything to Know

A stock market is a place where buyers and sellers meet to trade stocks. The stock market is inherently a hub for business transactions and an arena for trading to take place. On the ground level, the stock market is used by buyers or investors to buy stocks that they think have the potential to rise in price so that they sell them at a later date or time. The workings of the stock market are based on the demand and supply in the market. When the demand for stock or product increases, its price also increases.

On the other hand, if the demand decreases or the investors are not buying the stocks anymore, the prices also decrease. These fluctuating prices are studied, and an investor makes profits by buying at a low price at selling it at a higher price. But the stock market wasn’t always in the form we see in the global scenario today. 

Stock Market history has seen many ups and downs, and the Stock market trading arena has evolved accordingly. The stock market has seen many advances to make the investor’s work more efficient and informed. Stock market indices have played a major role in it.

An index is a collection of stocks that represents the current market. It indicates the prices of a particular sector or economy at large at a certain point in time. Dow Jones Industrial Average is an excellent example of a stock market index, and it lists 30 companies that are the current top players. Dow Jones Industrial Average is a singular number that is considered the average of all companies that comes under it.

What is a stock market?

The stock market is a physical or digital avenue where people known as investors and buyers trade shares, stocks, and other financial instruments to make a profit. The stock market is the place where you buy and sell the shares of a listed company.

What is a stock market
Stock Market

A listed company is nothing but a public limited company whose shares are owned by the public. Stock Market has been existing in the world for a few centuries now, and as time goes on, it is increasingly becoming a major economic indicator as well as a means of revenue for the public.

Who invented the stock market?

The Dutch East India Corporation, the first publicly listed company, founded Amsterdam’s contemporary stock market. The business made the decision to sell stock and give shareholders dividends in order to obtain funds. The Amsterdam Stock Exchange was subsequently founded in 1611. . The Dutch East India Company was also the first company to be listed in the modern sense. The reason why they became a publicly listed company is so that they amass some capital from the public. The public saw an opportunity to invest and make money for themselves. It was only the Dutch East India Company for several years until other companies who made regular voyages around the world started selling their shares with the promise of giving out dividends.

Where did the stock market start?

The first organization, considered a stock market, appeared in Antwerp, Belgium, in 1531. The stock market, like any other venture, had a humble beginning. The stock market, or at least the idea of the stock market, began in the Middle Ages. In Venice, to be precise, because, during those days, Venice was considered a meeting point for merchants from all over the world. These merchants used to bring products and goods from across the globe, and since the currency was different in each place, they traded with other goods of similar value. The kind of groups that was formed by merchants didn’t lead to a stock exchange. Instead, it led to the formation of an international trading center. In Venice, it was the government-issued securities that were mostly traded.

When Britain, France, and the Netherlands all chartered trips to the East Indies in the 1600s, this situation altered. Because few explorers could afford to embark on an international trading journey, limited liability firms were established to raise funds from investors in exchange for a portion of the company’s revenues.

But the first corporation to permit outside investors to buy shares, entitling them to a certain percentage of the company’s revenues, was the Dutch East India Company. They were also the first organization to issue public stocks and bonds through the Amsterdam Stock Exchange in 1602.

When did the stock market start?

The 1500s saw the advent of the first real stock markets. But there were many early instances of markets that resembled stock markets.

For instance, France had a system whereby courtiers de change handled agricultural debts across the nation on behalf of banks in the 1100s. The guys effectively traded debts, making it the first significant brokerage example.

Later, it was claimed that Venetian traders had begun dealing with government assets as early as the 13th century. Soon after, traders in government securities soon started operating in the surrounding Italian cities of Pisa, Verona, Genoa, and Florence.

The modern stock market started getting established in various parts of the world in the 1700s. The first stock market was formed in the year 1773. It was the London Stock Exchange. The stock markets or the types of markets that existed before 1713 were not exactly the kind of stock market that we see today. But we say that those markets led to the creation of the current stock market. The major reason for markets to form then was industrialization and colonialism. And although it was a profit-making mechanism for the investors, the reason for listing the company is mainly due to the risk they faced during the voyages. During a period of wars and pirating, it was necessary on the part of the East India Company to have some sort of security. And that responsibility was put on the investors. The modern stock exchange, like the London Stock Exchange and Philadelphia Stock Exchange, which was the first in America, saw the beginning of an industry that would determine the future of the economy of different countries.

In those early days, hardly one fully recognized the significance of the stock market. Though its strength and value were acknowledged, nobody completely grasped its full potential.

Because of this, the stock market’s early years were chaotic. Businesses in London would pop up overnight and issue shares of some illogical new endeavor. Numerous times, businesses could generate thousands of pounds before a single ship had sailed out of port.

There was no regulation, and little could be done to distinguish between legitimate and illicit businesses. Consequently, the bubble quickly deflated. Company dividend payments to investors ceased, and the English government forbade the issuance of shares until 1825.

The East India Company started trading in loan securities in the 18th century, which is when security trading in India first started. Beginning in the 1830s, corporate shares were first traded in Bombay alongside the stock of banks and cotton presses. The earliest, most informal stock exchanges in India date back to the 1850s when 22 stockbrokers started doing business in front of Bombay’s Town Hall under a banyan tree. As the number of brokers expanded, the shift continued, eventually settling in 1874 at what is now known as Dalal Street. The Bombay Stock Exchange (BSE) was founded in 1875 by this informal group known as the Native Share and Stockbrokers Association.

How does the stock market start?

The stock market started from the need for a marketplace to trade ownership in companies.   In the 1400s and 1500s, Bruges, Flanders, Ghent, and Rotterdam in the Netherlands all had their own “stock” market systems.

However, it is widely acknowledged that Antwerp created the first stock market system in the world. The prominent Van der Beurze family called Antwerp home, and the city served as Belgium’s commercial hub. Early stock markets were hence frequently referred to as Beurzen.

One thing was missing from all of these early stock markets: stocks. Although the institutions and architecture resembled modern stock markets, no one was really exchanging company stocks. Instead, the markets handled matters relating to the government, corporations, and personal debt. Despite the fact that the real properties being transferred were different, the structure and organization were comparable.

. Shareholders used to run a business in coffee shops before they shouted across trade floors and tossed order forms into the air. Investors traded early stocks with one another at coffee cafes. These equities were scrawled on sheets of paper.

In other words, these places were the first true stock markets because investors would go to coffee shops to buy and sell stocks. A specialized market area where businesses could trade stocks without needing to place a coffee order or shout across a busy café soon became apparent as a way to make the entire corporate world more efficient.

Today, almost all nations in the globe have their own stock exchange. Major stock markets typically began to develop in the developed world in the 19th and 20th centuries, not long after the London Stock Exchange and New York Stock Exchange were established. All of the world’s main economic powers, from Switzerland to Japan, have highly developed stock markets that are still thriving today.

What is the importance of the stock market?

A stock market in an important part of an economy since it enables stock trade. Below are a few more reasons why a stock market is important. 

Keeps stock trading transparent A stock market is an entity that helps in transparent dealings in all and every kind of trade. Companies are always under vigilance and controlled and regulated by statutory boards. 

Stock markets allow for fair price discovery:  The stock market is risky. But if they are used prudently, they help you amass great profits. A stock market is a place for the public to invest their money that would have otherwise been accumulating in banks. Investing in the stock market would allow you to make capital gains by making your money grow.

Regulatory framework and environment: Every country’s stock exchange is governed by a regulatory body. The regulator is in charge of regulating stock exchanges, developing them, and protecting investors’ rights. This means that when stock market investors invest in financial products, their interests are properly safeguarded by a regulatory framework. This considerably contributes to lowering risks associated with corporate fraud.

What is the first stock exchange?

The first stock exchange in its modern sense was the London Stock Exchange. Even though there have been pieces of evidence of markets even before London Stock Exchange was established. It didn’t have an official title and didn’t count as an official trading organization. But the question is interpreted in different ways. Some may say that the first stock exchange was put up in Amsterdam when the Dutch East India Company became the first company to be listed as a public company. Or it could also be the Buttonwood tree agreement, considered the starting point of a stock exchange. Either way, London Stock Exchange was the first one to call itself a stock exchange while the others were still organizing their foundation.

When are the largest stock market crashes?

A stock market crash occurs when the prices of the stocks fall drastically, and the demand reduces below a certain resistance point. 

The earliest market crash happened during the colonialization period. The East India Company name has cropped up almost everywhere since the colonial era. The British, French, and Dutch East India Company made voyages around the world. But some of the companies were not able to keep their promise. Thus, the people lost their trust in these companies and stopped investing. When the demand got low, and people stopped buying the shares, the market collapsed. Until then, it was only in Europe that the organized practice of buying and selling stocks took place, although it wasn’t that full-fledged.

But nowadays, such reasons for a market crash are not acceptable. Market crashes are usually unpredictable. But numerous patterns suggest that most crashes have come after or at the end of a long bullish period. Investors panic and sell, and prices decrease drastically. 

A few of the major stock market crashes are as follows:

  1. 1929 – Stock market crash: The United States stock market plummeted on October 29, 1929, in what became known as Black Tuesday. This triggered a series of events culminating in the Great Depression, a 10-year economic depression that afflicted all industrialized countries worldwide.
  2. 1987 – Black Monday crash: The Dow Jones Industrial Average, DOW, rose steadily from August 1982 to its peak in August 1987, with a year-to-date advance of 69% as of August 1987. During this time period, nineteen of the world’s top stock markets rose by an average of 296%. The trading volume on the New York Stock Exchange increased from 32 million to 181 million shares. From the last half of 1985 to the early part of 1986, the US economy experienced a change from a rapid recovery from the 1980 recession to a slower rate of expansion, resulting in a period of economic stagnation and a decline in inflation.
  3. 1999 – 2000 – dot.com bubble: The Internet fostered a jubilant attitude toward business in the late twentieth century, inspiring many aspirations for the future of electronic trade. As a result, many Internet companies (known as “dot-coms”) were founded, and investors anticipated that a company that ran online would be worth millions of dollars. However, many dot-coms were clearly not screaming successes, and those that were were grossly overvalued. As a result, many of these businesses failed, leaving investors with substantial losses. In reality, the fall of these Internet stocks was more responsible for the 2001 stock market crash than the September 11, 2001, terrorist attacks. As a result, the market fall cost investors $5 trillion.
  1. 2008 – financial crisis: The 2007-08 financial crisis, often known as the subprime mortgage crisis, was a major reduction of liquidity in global financial markets that began in the United States as a consequence of the collapse of the US housing market. It threatened the international financial system, led to the failure of several major investment and financial institutions, mortgage companies, insurance companies, and savings and loan associations, and precipitated the Great Recession (2007-09).
  2. 2020 – coronavirus crash: The Coronavirus epidemic has had a domino effect across many industries. Because of storage concerns, oil futures prices have fallen. Fears of a recession sent stock indexes lower earlier in March 2020.

While global markets became extremely turbulent in March, the stock market crash on March 9, 2020, will be known as Black Monday. When global stock indices, including bellwethers such as the Dow Jones, hit all-time lows in a single day. This shift has been described as the most severe since the 2008 global recession. On March 12 and March 16, these indices continued to register historical losses.

What are the largest stock exchanges today?

New York Stock Exchange is the largest stock exchange in the world today. The New York Stock Exchange (NYSE) is located on Wall Street, and it was established in 1817 under the name of the Buttonwood Tree agreement. It was only in 1963 the name was changed. Soon after World War 1, NYSE overtook the London Stock Exchange to become the largest stock exchange in the world based on market capitalization. 

NASDAQ is the second largest stock exchange in the world. The NASD established the NASDAQ, which debuted on February 8, 1971. Over 2,500 over-the-counter securities were traded in the opening hours of the first electronic stock exchange in history. Nasdaq has 3,554 listings with a market cap of $19.4 trillion as of 2021). The Nasdaq-100 NASDAQ and Financial-100 Nasdaq Composite are the major indices.

The Toronto stock exchange is another large stock exchange. The stock market was formally established on October 25, 1861, at Toronto’s Masonic Hall, when a formal resolution was adopted. 18 equities in total might be traded. The stock exchange has 2,231 listings as of November 2019 with a market cap of $3.1 trillion as of September 2020.

When did the New York stock market start?

The New York Stock Exchange can be traced back to the Buttonwood Agreement, which was signed by 24 stockbrokers on May 17, 1792, in reaction to the new nation’s first financial panic. There was an agreement between a few gentlemen called the Buttonwood Tree Agreement. The Buttonwood Tree Agreement later developed into New York Stock Exchange. Which later went on to become the largest stock exchange in the world. Soon afterward, many other big and small stock exchanges came up all across the globe in all the major cities.

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