What is the main purpose of a stock market?

The main purpose of a stock market is to facilitate the buying and selling of shares. This market acts as a centralized platform where investors can buy and sell ownership stakes in publicly traded companies. Through this process, companies can raise capital by issuing shares to the public, while investors can trade these shares based on their valuation, expectations of future performance, and market conditions.

The stock market plays a crucial role in providing liquidity, meaning that investors can easily convert their investments into cash by selling their shares. Additionally, it helps to determine the prices of shares through supply and demand dynamics, allowing for price discovery that reflects the perceived value of the companies based on current and future prospects.

This mechanism is essential for the functioning of the capitalist economy, as it connects those who want to invest funds with companies that need capital to grow and innovate. Without the stock market, the ability to transfer ownership and provide capital would be much more limited, stifling economic growth and investment opportunities.