Origins of Stock Investment
- A number of trading communities and businesspeople employed financial strategies and instruments that belie the contemporary financial system. Both Abu-Lughod and Curtin discuss the role of rich investors in establishing innovative or risky businesses, especially those run by young adventurers. (Stock is partial ownership in a company and those who invest in stock often provide the financial resources without taking a daily role in management or production.) Abu-Lughod notes that the Italians -- namely the Genoese and the Venetians -- developed these practices into a financial system with established norms and institutions such as investment banks.
- The financial information website Mint Life designates an association in Antwerp established in 1531 as the first stock market. However, while businesspeople and financiers came together to set up deals that often resembled the relationships between major shareholders and businesspeople today, nobody used stock certificates or other instruments that contemporary financial markets rely on. Mint Life further reports that in 1599 a group of English businesspeople formed a limited liability company (meaning creditors could not go after the individual businessmen), in which each had a stated percentage of ownership that corresponded to the amount of his initial investment -- in other words, stock.
- The Dutch East India Companies was the first company to issue stocks and bonds to an investor from the general public. The company succeeded in raising a lot of capital, and the idea caught on, eventually transforming general meeting places for doing business into early stock exchanges, the first of which was the Amsterdam Stock Exchange. A few other stock exchanges emerged in Europe, specifically in England. However, the Dutch remained the primary innovators of finance, developing option trading, short-selling and other instruments.
- The New York Stock Exchange was established in 1792 and eventually grew to be the largest and most important in the world, following the development of American industry. Over 200 years, the NYSE and associated American stock markets moved from coffee shops and outdoor exchanges to established buildings where licensed traders worked. In 1971, NASDAQ became the first electronic market. With the advent of electronic trading, stock investing ceased to be confined to physical market places. Information became easier to access, and the stock market developed into the international, interconnected virtual market that it is in 2011.
