A stock is a small part of the ownership of a company. Stock owner have a claim on the company’s assets and earnings. The more stock an investor buys the bigger his part on the company ownership.
The stock of an incorporated business constitutes the equity stake of its owners. It represents the residual assets of the company that would be due to stockholders after discharge of all senior claims such as secured and unsecured debt. Stockholders’ equity cannot be withdrawn from the company in a way that is intended to be detrimental to the company’s creditors.
The stock of a corporation is partitioned into shares, the total of which are stated at the time of business formation. Additional shares may subsequently be authorized by the existing shareholders and issued by the company. In some jurisdictions, each share of stock has a certain declared par value, which is a nominal accounting value used to represent the equity on the balance sheet of the corporation. In other jurisdictions, however, shares of stock may be issued without associated par value.
Stock trading happens when you buy or sell this rights you have to someone else (can be done using the stock market or not).
A stock market or equity market is a public entity (a loose network of economic transactions, not a physical facility or discrete entity) for the trading of company stock (shares) and derivatives at an agreed price; these are securities listed on a stock exchange as well as those only traded privately.
The size of the world stock market was estimated at about $36.6 trillion at the beginning of October 2008. The total world derivatives market has been estimated at about $791 trillion face or nominal value, 11 times the size of the entire world economy. The value of the derivatives market, because it is stated in terms of notional values, cannot be directly compared to a stock or a fixed income security, which traditionally refers to an actual value. Moreover, the vast majority of derivatives ‘cancel’ each other out (i.e., a derivative ‘bet’ on an event occurring is offset by a comparable derivative ‘bet’ on the event not occurring). Many such relatively illiquid securities are valued as marked to model, rather than an actual market price.
Market participants include individual retail investors, institutional investors such as mutual funds, banks, insurance companies and hedge funds, and also publicly traded corporations trading in their own shares. Some studies have suggested that institutional investors and corporations trading in their own shares generally receive higher risk-adjusted returns than retail investors.