The stock market is a global network of trading activities in which shares of publicly traded companies are bought and sold. Its role is two-fold: it allows businesses to raise funds that can help them grow and expand, and it provides investors with a way to own pieces of companies in which they believe they can earn returns. Those returns can come from dividend payments or from the price appreciation of shares over time. Regardless of how they’re earned, all stocks are influenced by the same economic factors: a good or bad economic outlook, for instance, can cause many or most stocks to rise and fall together.
Stocks are listed on exchanges, like the NYSE and Nasdaq, so that people looking to buy can match up with others willing to sell. In order to make a trade, buyers offer a “bid” amount and sellers an “ask” amount. The spread between these is called the bid-ask spread. The market is regulated to ensure fair practices and protect investors from fraud. There are a number of agencies that oversee the market, including FINRA, which focuses on protecting retail investors, and similar ones around the world.
There are also indices that track a group of stocks, and it’s these indexes that you might hear referenced in business reports when discussing the market. Some indices track entire countries, such as the TSX or the NASDAQ; others focus on individual markets, such as the London stock exchange; while still other indices are industry-specific, such as energy or health care.