How do stock markets function?

A stock market, also known as an equity market, is a platform where shares of publicly traded companies are bought and sold. The stock market provides a way for companies to raise funds by selling shares of their company to investors. When individuals buy shares, they become partial owners of the company and can potentially earn returns on their investment through dividends or an increase in the stock price.

Stock markets function based on the forces of supply and demand. The price of a stock is determined by the market's perception of the company's value and potential for growth. If more people want to buy a stock than sell it, the price will increase, and vice versa. The stock market also provides investors with liquidity, allowing them to easily buy and sell shares without affecting the price of the stock too much.

Stock markets operate with the help of exchanges, such as the New York Stock Exchange (NYSE) or NASDAQ. These exchanges act as intermediaries between buyers and sellers, and ensure that trades are executed fairly and efficiently. In addition to individual investors, stock markets also include institutional investors such as mutual funds and pension funds.