Question

Why are stock markets the most watched and reported of the financial security markets?

Answer 1

Stock markets are most watched and reported of the financial security markets because-

A. Stock market generally have a higher number of market participants-there is a large number of market participants who are always participating in stock market in order to react to various news and events

B.large number of companies which are listed into the stock exchanges, also makes it a very good indicator of continuous reflection of ongoing events into the economy.

C. Continuous price discovery by a large number of market participants is also there in stock market so that there is price fluctuations of stocks according to demand and supply of a large number of market participant and there is an efficient mechanism of price discovery.

D. Stock markets are highly volatile and they are highly interrelated with global stock markets of same kind, so they are always impacted by the global events and they show the true reflection of state of an economy.

E. One of the best things about Stock Market is that it always proactively determines various futuristic events and discount it at a current price, so that one can easily assume that which direction economy is heading into.

F. Stock markets are also associated with derivatives market which help in participation of large number of market participants which are regularly discovering the price through use of leverage and their capital.

G. There is a high level of regulation which is associated with the stock market and there is a high level of disclosure requirements as well,so there are lesser scope for fraudulent practices into the stock market.

H. Monetary policies of an economy are decided in accordance with the movement in the stock market even though it has to be decided in accordance with the economy, as it can be seen through movements of the stock market which is highly controlled by various political parties in order to give people a good disclosure, that their economy is performing well because there is stock market is going high.

So it can be said that stock market is an indicator of performance of an economy and it is widely followed.