What is the ‘Equity Market’ and why is it vital to a market economy?What is the Equity Market and what is its role in the economy? The Equity Market is the market in which shares are issued and traded, either through exchanges or over-the-counter markets.
‘Equity Market’
The securities traded in the equity market can be either 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.
What Stock Prices Mean for the Economy
Rising stock prices for companies from a particular country indicate a healthy, growing market.
- On the other hand, a downward trend in stocks may reflect weakening fundamentals in a country’s economy.
- Rising prices indicate that many buyers are investing their money in the future health and growth of the economy as a whole.
Stock Exchanges
The place where stocks in the equity market are traded is the stock exchange
- There are many stock exchanges around the world, and they can be either physical places or virtual gathering spots
- Electronic trading posts are becoming more common and a preferred method of trading over physical exchanges
- Most large companies have stocks that are listed at multiple stock exchanges throughout the world
Trading in the 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
- Stocks can be bought and sold easily and quickly, and the activity surrounding a certain stock impacts its value
- This market can be split into two main sectors: the primary and secondary market.
