Guide to Financial Markets by Marc Levinson

Author:Marc Levinson
Language: eng
Format: epub, pdf
Publisher: Public Affairs

The origins of equities

Equity, quite simply, means ownership. Equities, therefore, are shares that represent part ownership of a business enterprise. The idea of share ownership goes back to medieval times. It became widespread during the Renaissance, when groups of merchants joined to finance trading expeditions and early bankers took part ownership of businesses to ensure repayment of loans. These early shareholder-owned enterprises, however, were usually temporary ventures established for a limited purpose, such as financing a single voyage by a ship, and were dissolved once their purpose was accomplished.

The first shareholder-owned business may have been the Dutch East India Company, which was founded by Dutch merchants in 1602 and issued negotiable share certificates that were readily traded in Amsterdam until the company failed almost two centuries later. By the late 17th century, traders in London coffee houses earned their living dealing in the shares of joint-stock companies. But it was not until the Industrial Revolution made it necessary to raise large amounts of capital to build factories and canals that share trading became widespread. By 2013, the capitalisation of the world’s stockmarkets exceeded $58 trillion after the widespread recovery in share prices since 2008. Table 7.1 gives the total stockmarket capitalisation – the value of all shares listed – in several countries; Table 7.2 shows the value of share turnover in various countries.

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