HISTORY OF THE STOCK MARKET
When you get into investing, you will find many people asking you to consider putting a considerable chunk of money in the stock market. This advice stems from the fact that these investment vessels are critical in economies across the globe. All countries require a functional stock market for their economies to thrive and any changes in the economy get reflected in the stock market. The relationship is quite strong.
It is thus interesting that once you get to read about these markets, you realize that it has not always been what it is now. In the past, the stock market had little or no effect in the global economy and the stock markets we see today are as a result of significant changes that took place in our past. In this article, we will cover how they came up and subsequently rose to dominate our economies.
The 1500s served as the era when the stock markets gained recognition. However, that is not to say that there were no such markets in the past. Take an example of France. Back in the 1100s, courretiers de change came into the scene and worked at managing agricultural debts on behalf of banks in the country. This instance is an example of brokerage as their work was to trade in obligations.
Venice also has quite a fascinating history when it comes to stock markets. In the 1200s, merchants in the region started trading in government securities. It was not long after this that other cities took on this practice and slowly, it gained traction in Italian cities.
The first stock market
The original stock markets date back to the 1400s and 1500s with their origin set in Belgium. Given that the trade began in Antwerp where the Van der Beurze family had influence, the early markets went by ‘Beurzen.’ However, these stock markets lacked one essential thing: the stocks. The system is quite similar to what we have at present, and the difference only comes in as to what is in trade. While in the past they had an emphasis on debts, businesses and government affairs, the present market deals in stocks. More about the importance of the stock market
The first publicly traded company
At present, we have many publicly traded companies in the stock market, and their presence enables people to invest money and get returns from their input. However, this was not always the case. The first company that went public was the East India Company, and the underlying reason behind this move was the risk involved. Look at it this way. Sailing to unknown parts of the planet had proven risky over time, and many explorers set off on journeys never to return to their homes. In these journeys, ships got destroyed, and fortunes got lost, and it was only a matter of time before financiers decided to mitigate the risk. As such, they formed a corporation in the 1600s going by the name East India Company using a limited liability clause. Over time, investors realized that they were better off investing in some ships. In this way, if one ship failed to return, an investor could still recoup money from the one that made it home, and this led to the development of shares. In 1602, the Dutch East India Company released its shares into the market, thus allowing people to make investments on the same. They also introduced bonds which allowed people to get a fixed percentage of the profits derived from the company.
The coffee shops
We get used to seeing investors participate in trading in trade floors where they shout and wave papers in the air. The beginning of stock trading was not quite so. The early investors traded stocks written on paper with other investors in coffee shops. It was a long time before someone came up with an idea of a centralized location which would further enhance efficiency in trading.
In the beginning, people were quite excited over the concept of trading stocks and some investors were quick to take advantage. Someone would wake up and issue shares to the market without assets to back it up, and this behavior soon led to the bursting of the bubble. It was then that the government stepped in to introduce regulations on the same to avoid another occurrence such as this. This topic is wide
There you have it. Stock markets are what they are today owing to the lessons learned from the mistakes made in the past.