Why do stock markets exist?

Question

What purpose do they really serve? If it's just for companies to raise capital, then why have the stocks trade all day long exchanging trillions of dollars? And when you and I buy or sell a stock, we are not actually investing in the company, just exchanging ownership of the shares -- so why do the markets exist?

Answer 1

The stock market provides a place for those that want to invest in corporations a meeting place that so that it can be done in a simple manner.   At the same time is provides a place for sellers of stock to sell their ownership interest to those that may be interested in buying it.

The stock market is not really a place for corporations to raise their capital, but rather to provide an opportunity for others to buy ownership in the company or let existing owners sell their piece of equity

Companies usually have a one time program for issuing their stock, and this is through an initial public offiering (IPO) once the stock is issued to all those that wanted to buy into the company, the company now has raised its money.

The stock can keep trading, but the company doesnot recieve additional capital.

Owning stock is ownership in the company, you invest your money by buying a piece of the company, and when you own stock you have equity in the company.

Answer 2

its a big money game which is plays with traders .

Answer 3

To transfer money from the poor to the rich.

Answer 4

It would be somewhat less convenient for a company to raise capital if there were no market or a very limited market for the shares and the executives of the company would have no easy way to become rich off of their stock options, so you might say that it is partially at least due to greed on company management's part so that they can profit from their option awards.  

Well, we are actually investing in the company or at least some of us are.  More likely though many of us are speculating that the price will go up sometime soon and we can cash out for a quick profit.  That has become a favorite pass time with the advent of Internet trading.  That falls under the category of speculating rather than investing.  

There are many reasons why markets exist.  I have already provided two.  For executives to become rich off of their stock options and for speculators to have a means of diversion.  A 3rd reason is to give stock brokers a chance to make money to pay for their yachts and also investment bankers. A 4th is to provide a source of income for mutual fund companies and mutual fund managers.  Some make billions annually off of stock markets.  And of course it does also provide a means to invest in the future potential of companies.  There are some people who are investors as strange as that might be to believe.

Answer 5

so that exchanges can be made frequently and quickly

Answer 6

As long as companies exist they will need to raise capitol.

As long as investors who own shares of the company exchange them their will always be a market.

We need to buy and exchange stock somehow.