Us who know nothing about the stock market will never understand it. That puts us right in the

same class with economists and brokers who know all about the stock market.” He was not exaggerating.

The stock market — or, more broadly, the securities industry — is far more complex than

The markets for products and services. The stock market has been called the paper economy because

It deals in money, certificates of ownership, and certificates of debt. The business of the

Market is the buying and selling of both types of certificates, normally called stocks and bonds.

What complicates the market are all the devices that have been introduced into what was originally

A simple business transaction. Our unit deals only with the most general features of the market.

Primary and Secondary Markets

Securities are traded in two kinds of markets: primary and secondary. When a corporation decides

To issue stock to the public, it is undertaking a primary distribution. This first sale of stock is

In the primary market, and the money received goes to the company.

If everyone who bought stock simply kept it and waited to collect dividends, there would be no

Secondary market. The main reason for buying stock, however, is speculation — the hope that the

≫alue of the stock will increase so it can be sold at a profit. A secondary market — by far the larger