The Role of the Stock Market

Abstract

The major socio-economic role of a stock exchange is the valuing of securities and the provision of a well-run market-place where investors can buy and sell shares. The 'proper' valuation of securities is important as it provides signals for the allocation of scarce capita1 resources. Thus investment funds are channelled towards those companies which can use them most profitably (and, from the viewpoint of a capitalist economy, most usefully).