Introduction

The stock of a corporation signifies ownership in the corporation. A single share of the stock represents a claim on the fractional assets and the earnings of the corporation in proportion to the total number of shares. For example, if an investor owns 50 shares of stock in a company that has, in total, 1,000 shares, then that investor (or shareholder) would own and have a claim on 5% of the company’s assets and earnings.

The stocks of a company can be traded between shareholders and other parties via stock exchanges and organizations. Major stock exchanges include the New York Stock Exchange, NASDAQ, the London Stock Exchange Group, the Shanghai Stock Exchange, and the Hong Kong Stock Exchange. The prices that a stock is traded at fluctuate essentially due to the law of supply and demand. At any one moment, the supply is the number of shares that are in the hands of public investors, the demand is the number of shares investors want to buy, and the price of...