Economic question?

sps: Economic question?
Theodore Roosevelt once said, “there is no moral difference between gambling at cards or in lotteries or on the race track and gambling in the stock market.” What social purpose do you think is served by the existence of the stock market?

Answers and Views:

Answer by JFM
Stock markets can make investors and companies better off by expanded risk-sharing opportunities that allow them to shed unwanted risks and to acquire preferred risks. Welfare is enhanced by the fact that individuals can fashion preferred contingent patterns of consumption and can better manage risks associated with real investments that may not otherwise be made.

The risk allocation function also allows for the separation of funding from risk-bearing in investments. So talented entrepreneurs are able to put their ideas into reality because stock markets allow them to find investors willing to invest in their ideas.

The stock market is one of the most important sources for companies to raise money. This allows businesses to be publicly traded, or raise additional capital for expansion by selling shares of ownership of the company in a public market. The liquidity that an exchange provides affords investors the ability to quickly and easily sell securities. This is an attractive feature of investing in stocks, compared to other less liquid investments such as real estate.

Reference
“It’s No Gamble: The Economic and Social Benefits of Stock Markets” by Lewis D. Johnson; Bohumir Pazderka
Canadian Public Policy / Analyse de Politiques, Vol. 22, No. 2 (Jun., 1996), pp. 195-196

Answer by Alby
Stock Markets aren’t gambling, they are “markets”.

To a day trader they might be gambling. But to an investor, they are pure markets. Buying ownership of an asset which appreciates in value as that company expands and grows is not gambling.

In fact, the stock market is where you go to find the “real” price of an asset.