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A Stock exchange is a corporation or mutual organization which provides facilities for stockbrokers and traders to trade stocks and other securities. It may be a physical trading room where the traders gather, or a formalised communications network. Creation of a stock exchange is a strategy of economic development: it provides a means of raising capital for investment. Stock markets may enhance economic activity through the creation of liquidity: a liquid equity market makes investment more attractive because it allows individuals to acquire equity and when required to sell it quickly and cheaply. At the same time, companies enjoy permanent access to capital raised through equity issues. It has been found that countries that open stock markets grow faster, on average, than the control groups.[1]
An alternative view is that market liquidity may also hurt economic growth, because it encourages short-termism.[2] A downside of raising capital on a stock exchange is that it may result in loss of company control, typically to powerful large investors. Foreign ownership of securities and assets is often unappealing.[3] Extremely low income levels keep share ownership beyond the reach of most people in developing countries.
Countries without a stock exchange include Democratic Republic of the Congo.[4]
The Mongolian Stock Exchange as of 2006[update] was the world's smallest stock exchange by market capitalisation.[5][6]
- ^ Opening a Stock Exchange. Jenny A. Minier. University of Miami. January 2001.
- ^ LEVINE, ROSS. "Stock Markets: A Spur to Economic Growth". World Bank's Policy Research Department. Archived from the original on 2011-07-22. Retrieved 2008-12-13.
- ^ Irving, Jacqueline. "Africa's struggling stock exchanges Boost to economic development or "costly irrelevance"?". un.org. Retrieved 2008-12-13.
- ^ "Angola stock exchange to open this year". 2005. Retrieved 2008-12-13.
- ^ Jeffs, Luke (2007-02-12). "Mongolia earns a sporting chance with fledgling operation". Dow Jones Financial News Online. Retrieved 2007-09-11.
- ^ Cheng, Patricia (2006-09-19). "Mongolian bourse seeks foreign investment". International Herald-Tribune. Retrieved 2007-09-11.