The New York Stock Exchange (NYSE) is located in New York City. It is one of the biggest stock exchanges in the world and lists over 3,200 companies. The NYSE allows buyers and sellers to trade stock efficiently among each other. Just as a supermarket allows business to be conducted between merchants and consumers, the NYSE allows stock to be sold between buyers and sellers.
Up until January 2007, stocks were bought and sold on the floor of the NYSE. Now, the Hybrid Market has allowed stocks to be easily bought and sold electronically. The NYSE is efficiently run and set up specifically. All stock brokers must know where to go when they are ready to trade stock.
There are 1,366 seats available on the exchange that are bought and sold just as stock are. The price is very expensive and goes up and down along with the economy. You must have a seat in order to be able to trade stock on the NYSE.
When you watch the news during the financial segment, they often tell you how the Dow or the S&P 500 is doing. These are both Stock Market Indexes. The Dow is short for Dow Jones Industrial Average. It includes 30 large companies.
The Dow is calculated by a price-weighted average. This means that to find the value of the index, instead of just adding up the price of each 30 stocks and dividing it by 30, they look at is as a portfolio that holds one share of each stock. This keeps it proportional among the stock.
The S&P 500 is often considered a better index to look at because it includes 500 stocks and is market value-weighted. They compute the value based upon the market value of the shares outstanding. An example would be if one stock has three times as many stock outstanding, it will be counted three times as much.
Financial experts use Market Value Indexes to rate the overall progress of the stock market. For example, they will compare the value of the S&P 500 last month to this month to see if it went up or down. The Dow is used as well the same way, as are other indexes.
If you don’t understand the NYSE and how it works, you’ll have trouble when buying and selling stock. Understanding the indexes will also help you when you’re doing research. Use them to your advantage.