Stock exchange
Stock exchange — an organized financial market for the buying and selling stocks and bonds [Raupp & Raupp, 299].
The stock exchange, also called the stock market or in continental Europe, bourse an organized market for selling and purchasing securities such as shares, stocks, and bonds.
In most countries, the stock exchange has two essential functions. As a ready market for securities, it ensures their liquidity and thus encourages people to channel savings into corporate investment. As a pricing mechanism, it allocates capital among firms by determining prices that reflect the actual investment value of a company’s stock. (Ideally, this price represents the present value of the expected income stream per share.)
Membership requirements of stock exchanges vary among countries, mainly concerning the number of members, the degree of bank participation, the rigor of the eligibility requirements, and the level of government involvement. Trading is done in various ways: it may occur on a continuous auction basis, involve brokers buying from and selling to dealers in certain types of stock, or be conducted through specialists in a particular stock [Britannica].
Raupp E. D. & Raupp D. V. (2018). Dictionary of Economic Terms. Portsmouth, New Hampshire: Blue Impala Press. Stock exchange. Encyclopedia Britannica. Retrieved from: https://www.britannica.com/topic/stock-exchange-finance