The Stock Market

Which two animals are used to represent the rise and fall of the stock market?  

And the answer: bull and bear.

Photo credit: Investopedia.com

Put simply, a bull market happens when stock prices are rising, and a bear market happens when prices are declining. While the origins of these terms are unclear, one explanation is that a bull is used for a strong market because when a bull attacks, its horns go up; meanwhile when a bear attacks, its paws tend to swipe downwards.

Today, the stock market is an incredibly complex system of buying and selling, yet its origins date back to the 17th century. In the 1600s, the Dutch East India Company employed hundreds of ships to trade gold, porcelain, spices and silks around the globe. However, they ran into a problem of funding such a massive operation. As such, the company enlisted the help of private citizens – individuals who could invest money to support the trip in exchange for a share of the profits. This practice allowed the company to expand their business while supporting the invested individuals. By selling shares at ports across the world, the Dutch East India Company unintentionally created the first stock market.

Since then, businesses have taken up this model of collecting shares from willing investors to fund their business operations. While the stock market of today is markedly more complex than its original form, the bones of the model are more or less the same.

A new company will advertise their idea to big investors who, if they deem the idea successful, will buy the first shares and sponsor the company's Initial Public Offering, or IPO. This will launch the company on to the official "market" where any company or individual who is interested in investing may do so. The more shares that are bought, the more successful the company appears, encouraging further investment. The more shares that are sold, however, create the opposite appearance, and often result in more individuals selling their investments. The feedback loop of buying and selling is a vicious, unpredictable beast, and is greatly influenced by the market at large (of which companies have no control).  

Learn more about the stock market below.


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