What is the Stock Exchange and how does it work?
The Stock Exchange is nothing more than a giant globally network
tend to orginize the market place where every day huge sums of money are moved back and forth.
In total over sixty trillion (60,000,000,000, 000) euro a year are traded.
More then the vallue of all goods and services of the entire world economy.
However it's not appels or second hand toothbrushes that are traded on this marketplace.
But predominantly securities.
Securities are rights to assets , mostly in the form of checks.
A share stands for a share in a company.
But why are shares traded at all?
Well, first and foremost the value of a share relates to the company behind it.
If you think the value of a company in terms of a pizza.
The bigger the overal size of the pizza, the bigger every piece is.
If for example facebook is able to increase its profits with a new buisness model.
The size of the companies pizza will also increase, and as a result so will the value of its shares.
This is of course great for the share holders.
A share with perhaps use to be thirtyeight euros could now be worth a whole fifty euros.
When it's sold this represents a profit of twelve euro per share!
But what does facebook gain from this?
The company can raise funds by selling the shares and invest or expand it's buisness.
Facebook for example has earned sixty million dollars from it's listing on the Stock Exchange.
The trading of shares though, is frequently a game of chance.
No one can say whay company is going to preform well and what not.
If a company has a good reputation, investors will back it.
A company with a poor reputation or poor preformance will have dificulty selling its shares.
Unlike a normal market witch goods can be touched and taken home.
On the Stock Exchange only vurtual products are avalable.
They apear in the form of shareprices and tables on monitors.
Such shareprices can rise or fall within seconds.
Shareholders have therefor have to act quickly in order not to miss an opertunity.
Even a simple rumor can result in the demant for a share falling fast regardless of the real value of the company.
Of course the oposite is also posible.
If a particular large amount of people buy weak shares. Becouse if they see for example great potential behind an idea.
There value will rise as a result.
In particular young companies can benefit from this.
Even if there sales might be falling, they can generate cash by placing there sales.
In the best case senario this will result in there idea becomming reality.
In the worst case senario. this will result in a speculative bubble with nothing more than hot air.
And in a case with bubbles, at somepoint they will burst.
The value of Germanies biggest thirthy companies is summarized in what is known as the DAX share index.
The DAX shows how well or poor each of this mayor companies and there by the economy as a whole are preforming at the present time.
Stock Exchange is in other countries that also have there own intecies.
And all of this markets together create a globally networked markedplace.
Subtitles by Tiago Scholten.
Subtitles by the Amara.org community
This page was last edited on 29 July 2023, at 09:23
