Equity Market 101

Joshua Dawe
Jul 10
4 min read

Updated: Jul 17

Global equity markets are where shares of companies are bought and sold, connecting businesses that need capital with investors who want to grow their wealth. These markets are now vast, liquid, and interconnected across continents. Over 58,000 companies worldwide have publicly traded shares, with the U.S. alone accounting for nearly $49 trillion in market value, roughly 40 percent of the world’s total. This overview breaks down the who, what, where, when, and why of stock markets to give you a sharper perspective on how they work and why they matter.

Who participates?

Companies (Issuers): Companies issue shares when they want to raise funds for growth, new projects, or acquisitions. By going public through an initial public offering (IPO), they exchange ownership stakes for investor cash, capital they don’t have to pay back like a traditional loan. This helps companies grow faster, attract talent with stock options, and build credibility.

Investors (Buyers): On the other side are investors, both institutional and retail. Institutional investors include pension funds, hedge funds, mutual funds, insurance companies, and sovereign wealth funds. They typically hold huge amounts of capital and can influence market trends with large trades. Retail investors, everyday people like you and me, have become more active in recent years thanks to user-friendly online platforms, real-time data, and lower fees.

Other players include brokers who execute orders, market makers who ensure there’s always a buyer and seller for popular stocks, and regulators who set the rules to keep markets fair. All these participants together keep the market liquid, transparent, and trustworthy.

What are they?

A stock market is essentially a network where shares of ownership in companies are traded. Most of this happens on organized, regulated exchanges like the NYSE or NASDAQ. These exchanges match buy and sell orders, report prices, and enforce listing standards. Modern exchanges rely on sophisticated electronic systems that execute trades in milliseconds.

Stocks can also trade over-the-counter (OTC), meaning directly between parties through dealer networks, without a centralized exchange. OTC stocks often belong to smaller, less established companies that don’t meet a big exchange’s requirements. They can be riskier and more thinly traded.

When you buy shares, you own a piece of that company. Common stock gives you voting rights and the chance for dividends and capital gains. Preferred stock generally doesn’t offer voting rights but pays fixed dividends first and has priority if a company liquidates. Preferred shares act like a blend between bonds and stocks, providing more stable income but typically less upside if the company’s value soars.

Where are they?

Equity markets operate in nearly every major economy, but a few exchanges dominate the landscape. The U.S. stock market leads the world by a huge margin, with the NYSE and NASDAQ accounting for the largest slice of global market capitalization. These exchanges are home to giants like Apple, Microsoft, and Amazon.

Asia’s markets are powerful players too. China’s Shanghai and Shenzhen Stock Exchanges rank among the world’s biggest, with millions of retail traders driving daily volumes. Japan’s Tokyo Stock Exchange and India’s NSE are also key regional hubs. In Europe, Euronext, which links Paris, Amsterdam, and other markets, and the London Stock Exchange remain major centers for international listings.

In total, the global equity market is worth well over $100 trillion. The U.S. leads in trading volume, averaging more than 11 billion shares traded daily, but Asian markets sometimes rival this thanks to active retail traders. High trading volume is crucial because it means you can easily buy or sell at fair prices with minimal delay.

When did they develop?

Modern stock markets trace back over four centuries. The Dutch East India Company famously became the world’s first company to issue public shares in 1602, traded on the Amsterdam Stock Exchange, the first formal exchange ever. This innovation allowed investors to pool money and share the risks and rewards of overseas trade.

In London, stock trading flourished in coffeehouses in the 1600s, leading to the official founding of the London Stock Exchange in 1773. Meanwhile, in the U.S., 24 brokers signed the Buttonwood Agreement under a tree on Wall Street in 1792, which laid the foundation for what would become the New York Stock Exchange.

Stock markets grew alongside the Industrial Revolution as businesses needed more capital to expand. Regulatory bodies emerged in the 20th century after events like the 1929 crash and the Great Depression to protect investors and stabilize markets. The biggest leap came with electronic trading, starting with the launch of NASDAQ in 1971, the first fully electronic exchange. Today, trading happens in milliseconds, and investors anywhere in the world can connect with markets around the clock.

Why have them?

Stock markets serve a win-win function. For companies, they are a way to raise large sums of money quickly and spread business risk across thousands or millions of shareholders. This access to capital fuels innovation, hiring, and economic growth.

For investors, stock markets are a gateway to build wealth over time. Investors buy shares hoping their value will rise, earning capital gains, and many also receive dividends, which are a share of company profits. Long-term equity investing has historically outperformed many other assets.

Beyond individual gains, stock markets help economies by channeling money into the most promising businesses, driving efficiency and progress. This constant flow of funds helps create jobs, fund research, and develop new industries. And by giving people a stake in businesses, markets align the interests of companies and society.

Stock markets are more than tickers and charts; they are living systems that connect companies with people who believe in their potential. The who, what, where, when, and why give you the bigger picture behind each trade. Knowing this helps you invest with more confidence and context. You are not just buying a piece of paper, you are buying a piece of a business and its future.

Sources

Investopedia – Financial Markets: Role in the Economy, Importance, Types, and Examples (Updated May 08, 2025).
Investopedia – The Evolution of Stock Exchanges (Updated Feb 08, 2024).
Investopedia – What Is the Stock Market and How Does It Work? (Updated May 14, 2025).
Investopedia – Preferred Stock: What It Is and How It Works (Updated June 01, 2025).
SIFMA Insights – Primer: Global Equity Markets Comparison (Sept 2024).
Strike.Money – History of Stock Market: Everything to Know How It All Started.