Note: This is post #89 in a weekly video series on basic economics.
A company can raise money and create new investment by selling shares through an initial public offering (IPO). When you buy a company’s shares on the stock market, though, no new investment is created. So what exactly do stock markets do?
In this video by Marginal Revolution University, Alex Tabarrok explains how stock markets serve as a financial intermediary and serves as a key institution encouraging new businesses.
(If you find the pace of the videos too slow, I’d recommend watching them at 1.5 to 2 times the speed. You can adjust the speed at which the video plays by clicking on “Settings” (the gear symbol) and changing “Speed” from normal to 1.25, 1.5 or 2.)
Click here to see other videos in the Introduction to Economics series.