In order to understand the stock market, one first needs to comprehend
the definition and meaning of the word stock. A stock is “A type of security that
signifies ownership in a corporation and represents a claim on part of the
corporation's assets and earnings” [1]. In more literal terms, an investor buys a
small bit or several small bits of a company and then can directly benefit from
any successes or losses that the company may endure. Put simply, a
stockholder can become wealthy if invested in a company that succeeds or can
lose tragically if a company begins to slide.
The origins of the stock market can be traced all the way back to twelfth
century France where the first brokers traded with agricultural debts. The idea
soon spread around thirteenth century France and eventually to Amsterdam and
Venice where brokers traded with government securities. The first stock
exchange, in the strictest sense, can be considered to be the Amsterdam Beurs,
where continuous trading started during the seventeenth century and where
practices such as short selling were born [2].
The modern stock market can be traced to Philadelphia in 1790, although
many people tend to wrongfully assume New York City to be the modern
birthplace. The New York Stock Exchange (NYSE) was established in 1792 on
Wall Street. From its humble beginnings as an exchange between 24 New York
merchants, the NYSE has grown to become a powerful force, a connection to
2
worldwide money markets, and the home of $2.2 trillion in transactions per day
[3].