What are financial markets?
Financial markets are systems through which people and institutions exchange financial assets and raise or allocate capital. Markets may operate through exchanges, dealer networks and other trading arrangements. Structures vary by asset and jurisdiction.
Stocks and ownership
A stock, or share, generally represents an ownership interest in a company. Shareholders may benefit if a company grows or distributes profits, but share prices can also decline. Rights attached to shares depend on the company and the type of share issued.
Bonds and lending
A bond is a form of borrowing. The issuer receives money and generally agrees to make specified payments and repay principal according to the bond’s terms. Bonds can be exposed to changes in interest rates, inflation, creditworthiness and liquidity. Repayment is not equally certain for every issuer.
Exchanges and participants
An exchange provides rules and infrastructure for bringing buyers and sellers together. Other markets may use dealers or electronic networks. Participants can include individuals, companies, funds, banks, governments and other institutions with different goals and constraints.
Why prices change
Prices reflect interactions between supply and demand, shaped by expectations and available information. Company results, policy announcements, economic data and unexpected events can change what participants are willing to pay. A price movement does not, by itself, reveal a certain future direction.
Market indices
A market index tracks a defined group of assets according to a set of rules. Indices can describe market segments or compare historical performance. Results depend on which assets are included, how they are weighted and how the index is calculated.