If you are dealing with the topic of shares, you cannot avoid Wall Street: a famous, economically important financial district in America with the largest stock exchange in the world. In this article, you will find out exactly what Wall Street is, how it came into being, which well-known indices are associated with it and which historical share price collapses have gone down in history.
Wall Street Definition
Wall Street is a well-known street in the borough of Manhattan in New York. This street is known as "Financial district" because several banks and financial institutions are located here. The US central bank, known as the Federal Reserve, is also located here.
The term Wall Street is not only used for the street. It often refers to the World's highest-turnover stock exchange meant that New York Stock Exchange, which is also located in this street.
The NYSE is a so-called "Open Outcry" exchange. These are stock exchanges with traditional floor trading. These exchanges also function on the basis of computers, but are not fully automated like computer exchanges such as Nasdaq. In traditional floor trading, there are still traders who manage and monitor the activities.
History of Wall Street
The stock exchange was founded in 1792, when securities traders from New York signed the so-called "Buttonwood Agreement". This agreement dealt with the trading of securities in US dollars. More specifically, shares and bonds were traded.
- While only 5 securities were traded in 1792, share trading rose sharply in the following years.
- The history of Wall Street began with this contract, even though no official stock exchange had yet been founded.
This happened on March 8, 1817, when the rules of the stock exchange were established for the first time. This created a formal organization known as the "New York Stock & Exchange Board" was designated. The exchange did not receive its current name, the "New York Stock Exchange", until 1863. In 1911, the exchange was relocated to the building used today. The NYSE has grown steadily since then.
For the rapid growth of the stock market for several reasons:
- Firstly, a permanent transatlantic telephone cable was created in 1866. This significantly improved communication between New York and London.
- Another aspect is Edward Calahan's invention, the so-called stock ticker. This made it possible to revolutionize the dissemination of information. Investors were able to constantly view current international daily prices.
Diese technological developments and the comparatively early elaboration of the Rules and regulations contributed to its strong growth and current importance. As a result, the exchange was regarded as innovative, reliable and trustworthy.
Well-known indices on Wall Street
The Dow Jones Industrial Average is directly linked to Wall Street and is the oldest stock index still in existence in the world. It includes the 30 largest American companies. The companies originally included were traded on Wall Street from the outset.
- The option of bundling shares using an index was another innovative development on the stock exchange.
- The original aim was to use the index to measure the performance of the US stock market.
The NYSE also has its own index: the NYSE Composite Index. This enables a broader view of the market, as all of the more than 2,2000 NYSE shares are combined in one index.
The biggest crashes on Wall Street
Despite the great success story of the NYSE, there have always been major price collapses that have gone down in history. The best-known examples include the Global economic crisis of 1929.
This began with the so-called "Black Thursday", whereupon a severe recession followed. Compared to its record high in September 1929, the Dow Jones had lost almost 90 percent by the summer of 1932. This period was characterized by a sharp decline in industry, banking crises, high unemployment and other crises.
Another example is the Great recession of 2008in which the Real estate bubble burst. The real estate market in America was severely affected. Many people lost their homes and their savings. This was due to poorly managed mortgages, which resulted in numerous financial companies having to file for bankruptcy.
Conclusion: What is Wall Street?
The term Wall Street refers to the World's largest stock exchange or the street in which it is located. The New York Stock Exchange is an open outcry exchange and therefore has a classic floor trading. The street is still home to major banks, the Federal Reserve and other financial institutions.
Your High importance the stock exchange through innovative developments. These included the Stock ticker by Edward Calahan, who revolutionized the dissemination of information and created a lasting transatlantic telephone cablewhich improved communication.
When looking at the history of the stock market, it is also necessary to Historical price slumps must be taken into account. These include Black Thursday in 1929 and the subsequent recession. Another example is the burst real estate bubble in 2008.