Microeconomic Special Topic Paper

Microeconomic 201

Special Topic Paper #2

http://www.investopedia.com/articles/investing/082614/how-stock-market-works.asp

On August 26, 2014, Investopedia, the world’s largest digital financial education platform, published the article “How The Stock Market Works?” on its website. The article was written by Cory Mitchell, a proprietary trader and Chartered Market Technician specializing in short to medium-term technical strategies. It talks about the function of the stock market.

The author starts the article by defining a stock and a share. Mitchell compares a stock with a piece of the company. He states that a company issue shares when they need to raise money. He also explains the concept of initial public offering. Mitchell goes on explaining the reasons why investors buy shares. He tells that it is very difficult trying to predict which stock will rise or fall, and when. The author talks about diversification and the ultimate goal of buying shares. He even defines the concept of dividend and shareholder as well. The article then discusses the reasons for selling shares. It mentions the aggression of buyers and sellers, which leads to pushing up and down in prices. Moreover, it gives information on when investors and traders sell shares. The author continues the article by talking about volume. Mitchell informs the readers that volume is the amount of shares change hands in a day. After that, he talks about market makers. The article ends with the mention of the bottom line.

In the article, Mitchell explains the concepts and the definitions very detail, which makes the article easy to understand. He also provides examples in his article. The author helps the readers understand more about the stock market, and how the stock market works, so that they will likely find it is not as scary as they may think because of fall promises and highly public stories of investors striking it rich or losing everything skew perceptions, and that it is a viable investment.