Table of Contents
Introduction
The stock market is the epitome of a major world of figures, trends, and all manner of possible opportunities that fuel the international economy. While most are familiar with the basics, there exist some really surprising facts related to the stock market even for long-time investors that they don’t know of. Here are 10 surprising facts related to the stock market that might give you an entirely new perspective on investing.
1. The Stock Market is Older Than You Think
The modern stock market is said to have originated in the 17th century in Amsterdam, Netherlands. In 1602, the Dutch East India Company was the first publicly traded company, allowing investors to buy shares of the company to fund voyages. This early model of stock trading set the foundation for today‘s markets.
2. The Stock Market Doesn’t Always Predict Economic Health
While the stock market does fluctuate, a majority views its rise as a mark of a booming economy; not always so, for some periods in the stock market have gone up although the economy was either at its bottom or on its down swell. A surge in stock prices often coincides with the attitude and whims of investors or just plain speculations in the markets, which sometimes have no association whatsoever with the underlying situation in the economy.
3. Market Crashes Happen More Often Than You Think
While the Great Depression crash in 1929 and more recently the financial crisis in 2008 are fresh in everyone’s mind, most people do not realize that market crashes are, in fact, much more routine than they might think. Minor corrections of 10-20% happen almost every few years, and full-scale crashes (30% or worse) occur every decade or so. With this history, investors tend to be much calmer during volatile periods.
4. October is Known as the ‘Jinx Month’ for Stocks
October has witnessed several major crashes, particularly the Wall Street Crash of 1929 and Black Monday in 1987. Those are coincidences, but most investors fear the month of October as being risky for trading in stocks.
5. The Stock Market is Closed on Weekends and Holidays
What’s interesting is that most people do not know that the stock market does not work on 24/7 basis. The NYSE and NASDAQ are closed on weekends and major holidays such as Christmas and New Year. However, through electronic trading and pre-market/after-hours trading, there is some activity available outside regular hours.
6. There Are More than 60 Major Stock Exchanges Worldwide
Most people are familiar with NYSE and NASDAQ, but, in reality, there exist more than 60 crucial stock exchanges worldwide. The New York Stock Exchange is the largest in terms of market capitalization, followed by NASDAQ, the Tokyo Stock Exchange, and several others. Each has distinct rules, trading hours, and unique stocks.
7. High-Frequency Trading (HFT) Accounts for a Significant Portion of Trades
High-frequency trading, for short, HFT, is a type of algorithmic trading that uses super-fast computers to execute thousands of trades in just seconds. It is surprising that HFT accounts for up to 50% of all stock market trades. Its practice is controversial because extreme short-term volatility in the stock prices is believed to be created by this form of trading.
8. “Fear” and “Greed” Indicators Can Predict Market Sentiment
Surprisingly, emotions have a huge role in stock market movements. Indicators such as VIX, which is referred to as the “Fear Index,” show the market sentiment based on volatility. Fear is accompanied by falling prices, whereas greed leads markets to new heights.
9. The Stock Market Offers a ‘Santa Claus Rally’ Effect
One very minor market rally happens at the end of December to two days into January, usually a ” Santa Claus Rally”. Many theories abound explaining how people are in the spirit for good, and bonuses around Christmas drive more buying into a certain stock price.
10. Dividend-Paying Stocks Can Earn You Passive Income
Besides increasing in stock value, earnings are also disbursed as dividends that investors may enjoy. Many companies tend to give out some of the earnings made to the shareholders as a form of dividend, thereby offering a chance for earning passive income while the stocks are being held. A few high-dividend stocks provide yields much more than savings accounts and other investing options.
Conclusion
These surprising facts about the stock market show a world that is complex and dynamic, full of nuances, far beyond buying and selling shares. If you are an investor or just getting into it, this information will guide you to make better financial decisions.
FAQs
Why is October considered a risky month for stocks?
- October has seen several major crashes, including the infamous Wall Street Crash of 1929 and Black Monday in 1987. These events have led some investors to believe October is a “jinx month,” though this is more superstition than fact.
What are high-frequency trades, and why are they important?
- High-frequency trading (HFT) uses algorithms and fast computers to execute trades within milliseconds. HFT accounts for a significant portion of daily trades and can create quick, short-term price fluctuations, making it a point of debate in the finance world.
What is the “Santa Claus Rally”?
- The “Santa Claus Rally” is a phenomenon where stock prices tend to increase during the last week of December and the first two trading days of January. It’s thought to be influenced by holiday optimism and year-end bonuses, which encourage buying.