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What exactly is a stock market? / Glossary

Glossary

Share

Ownership of a share of a company’s equity. It entitles the holder to a dividend (a share of the profits generated by the company). Shares can be traded on the stock market.

Price (stock market)

It is the price of a stock (for instance a share), determined by matching the buy and sell orders for the stock in question. The price thus represents the balance between supply and demand, and is likely to vary continually during a trading session.

Insider dealing

An offence whereby a person buys or sells stocks in a listed company on the basis of information he has gained through his function within that company and to which other market participants have no access.

Price setting

The fixing of a stock market price: it can be done continually (prices are adjusted after each buy or sell) and via fixing (matching buys and sells at set times).

Paperless stocks (“dematerialisation”)

In past times, stocks were held in paper form (as certificates of ownership). Now that we have electronic trading, this is no longer the case: stocks have become “dematerialised” (i.e. they are now in paperless form).

Euronext

A pan-European stock exchange created in 2000 and bringing together several European stock exchanges (Amsterdam, Brussels, Paris and Lisbon). In 2007, it merged with the New York Stock Exchange to become the NYSE Euronext, the largest stock exchange worldwide. Itself a listed company, it was acquired in 2013 by ICE (Intercontinental Exchange).

Stock market index

An average of the prices of the stocks making up the index. These can represent a simple arithmetical average or be weighted, for example by the market capitalisation of the respective companies. Indices can cover all sectors or specific sectors. Examples: Bel 20, S&P 500, CAC 40, etc.

Liquidity

A market’s ability to absorb large numbers of sell or buy orders without any major effect on prices. The greater a market’s liquidity, the easier, quicker and less expensive it is to carry out trades, and thus – for the investor – to invest his savings in a way he sees fit.

Crash

A sharp fall in stock prices following a surge of sell orders.

Bubble

An excessive inflation of prices compared to the underlying economic value of the assets in question. A bubble often develops slowly but generally explodes suddenly.

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