In this chapter, we examined corporate stocks and stock markets. Holders of corporate (preferred and common) stock have an ownership interest in the issuing firm based on the percentage of stock held. Stock markets are the most watched and reported of the financial markets. We described the major characteristics of corporate stocks—for example, dividend rights, residual claim status, limited liability, and voting rights of stockholders. We also looked at the primary and secondary markets for stocks, including a description of the trading process. While the NYSE has historically been the major stock market exchange in the United States, we showed that the NASDAQ system is increasing in importance.

We also looked at stock market indexes as predictors of future economic activity, reviewed the speed with which stock market prices adjust to new information, and described the major regulations governing stock market trading. We concluded the chapter with a brief look at international stock market activity—foreign investments in U.S. corporate stocks and U.S. investments in foreign corporate stocks.