1 00:00:00,000 --> 00:00:03,485 What is the Stock Exchange and how does it work? 2 00:00:03,626 --> 00:00:07,209 The Stock Exchange is nothing more than a giant globally network 3 00:00:07,209 --> 00:00:14,098 tend to organize the market place where every day huge sums of money are moved back and forth. 4 00:00:14,301 --> 00:00:19,073 In total over sixty trillion (60,000,000,000,000) Euros a year are traded. 5 00:00:19,073 --> 00:00:23,799 More than the value of all goods and services of the entire world economy. 6 00:00:24,612 --> 00:00:29,978 However it's not apples or second hand toothbrushes that are traded on this marketplace. 7 00:00:29,978 --> 00:00:32,612 But predominantly securities. 8 00:00:32,612 --> 00:00:36,923 Securities are rights to assets, mostly in the form of shares. 9 00:00:36,923 --> 00:00:39,703 A share stands for a share in a company. 10 00:00:40,172 --> 00:00:42,980 But why are shares traded at all? 11 00:00:43,204 --> 00:00:47,655 Well, first and foremost the value of a share relates to the company behind it. 12 00:00:47,655 --> 00:00:50,771 If you think the value of a company in terms of a pizza. 13 00:00:50,771 --> 00:00:54,791 The bigger the overal size of the pizza, the bigger every piece is. 14 00:00:55,396 --> 00:00:59,903 If for example Facebook is able to greatly increase its profits with a new business model. 15 00:00:59,931 --> 00:01:05,813 The size of the companies pizza will also increase, and as a result so will the value of its shares. 16 00:01:06,136 --> 00:01:09,003 This is of course great for the shareholders. 17 00:01:09,003 --> 00:01:15,181 A share which perhaps used to be worth 38 euros could now be worth a whole 50 euros. 18 00:01:15,181 --> 00:01:19,211 When it's sold this represents a profit of twelve euro per share! 19 00:01:19,211 --> 00:01:21,610 But what does Facebook gain from this? 20 00:01:21,653 --> 00:01:26,504 The company can raise funds by selling the shares and invest or expand its business. 21 00:01:27,168 --> 00:01:32,388 Facebook, for example, has earned sixteen billion dollars from its listing on the Stock Exchange. 22 00:01:32,388 --> 00:01:35,890 The trading of shares though, is frequently a game of chance. 23 00:01:35,890 --> 00:01:39,514 No one can say which company will preform well and which will not. 24 00:01:39,824 --> 00:01:43,663 If a company has a good reputation, investors will back it. 25 00:01:43,663 --> 00:01:48,626 A company with a poor reputation or poor performance will have difficulty selling its shares. 26 00:01:49,869 --> 00:01:53,272 Unlike a normal market in which goods can be touched and taken home 27 00:01:53,272 --> 00:01:56,767 on the Stock Exchange only virtual goods are available. 28 00:01:57,945 --> 00:02:01,873 They appear in the form of share prices and tables on monitors. 29 00:02:01,873 --> 00:02:05,178 Such shareprices can rise or fall within seconds. 30 00:02:05,178 --> 00:02:09,565 Shareholders therefore have to act quickly in order not to miss an opportunity. 31 00:02:09,781 --> 00:02:15,822 Even a simple rumor can result in the demand for a share falling fast 32 00:02:16,180 --> 00:02:17,180 regardless of the real value of the company. 33 00:02:17,538 --> 00:02:20,133 Of course the opposite is also possible. 34 00:02:20,133 --> 00:02:23,113 If a particularly large number of people buy weak shares. 35 00:02:23,113 --> 00:02:26,113 Because if they see for example great potential behind an idea. 36 00:02:26,113 --> 00:02:28,275 Their value will rise as a result. 37 00:02:28,275 --> 00:02:31,261 In particular young companies can benefit from this. 38 00:02:31,261 --> 00:02:36,874 Even though their sales might be falling, they can generate cash by placing their shares. 39 00:02:37,825 --> 00:02:42,239 In the best case scenario this will result in their idea being turned into reality. 40 00:02:42,455 --> 00:02:48,017 In the worst case scenario, this will result in a speculative bubble with nothing more than hot air. 41 00:02:48,017 --> 00:02:51,943 And as the case with bubbles, at some point, they will burst. 42 00:02:51,943 --> 00:02:57,590 The value of Germany's biggest thirty companies is summarized in what is known as the DAX share index. 43 00:02:59,083 --> 00:03:02,283 The DAX shows how well or poorly these major companies 44 00:03:02,283 --> 00:03:06,735 and there by the economy as a whole are performing at the present time. 45 00:03:07,948 --> 00:03:11,526 Stock Exchange is in other countries also have there own indices. 46 00:03:11,526 --> 00:03:16,624 And all of these markets together create a globally networked marketplace.