Shares, America 1920 notes Essay

Submitted By Bia1572
Words: 478
Pages: 2

What are shares?
Shares are just that, a ‘share’ in a company. If a person needs money to set up a company, or money to expand an existing company, the owner can raise that money by selling shares in the company. When the owner does this, he or she no longer owns all the company – the shareholders, the people who buy the shares, do. What they get in return for their shares is a yearly dividend. Each year, if it has made a profit, that profit is divided up between the shareholders. The amount they get is calculated according to the number of shares they have. Before the 1020s, only wealthy or banks bought shares. They bought shares in companies they thought would pay a good dividend, and they usually kept the shares for a long time. If shareholders needed money, they could sell their shares. Shares were not sold from person to person. For most companies they could only be bought at a stock exchange – the most important was the New York Stock Exchange in Wall Street.
How the stock market worked
The stock market is the general name for buying and selling shares. Shares had no set values. They were worth whatever someone was prepared was prepared to pay for them. If you bought a share in a company for $10 one week, it could be worth $10 the next week, or $100 or $1. It all depended on the demand for the shares. The people who traded shares were called ‘brokers’. If trading was ‘slow’, the prices of shares could stay the same for days, weeks or months. But, if there was a lot of buying and selling in the stock market prices could go up and down several times a day.
In the 1920s, because new companies made such big profits, the prices of their