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How Do Stocks Work?


One of the best ways to understand how stocks work is to consider a specific, blue chip example: General Electric. Each publicly traded company stock has what’s called a stock symbol, usually a short acronym or abbreviation short-form used to refer to the company. In the case of General Electric, that short-form is GE.

Summary of Activity

On any given day, the summary of activity for a company stock delineates all sorts of information pertinent to each and every shareholder, anyone who owns a “piece” of the company. This information includes: the company’s market capitalization, or total value derived by the multiplication of the number of outstanding shares by the price of an individual share; the previous day’s stock price close; the stock’s 52-week low and 52-week high; and the volume of shares traded on a particular day. In the case of November 16th, 2010 for example, more than 74 million shares of GE changed hands, a rather astonishing number when you consider this is just for a single NYSE listed company, on a single day.

Who Owns What?

In the case of a blue chip stock like GE, it’s not surprising that a full third of all company shares are owned by the top 50 institutional firms in the United States. Major brokerages dominate the NYSE, and it is they who also have first access to the profitable ground of Initial Public Offering (IPO) stock allotments, when a newly listed company’s stock can rocket up in price on its first day.

Stocks That Pay Dividends

In addition to the fluctuating unit stock price, which forms the basis of an individual investor’s profit or loss when they finally decide to sell back the share(s), stocks can pay quarterly dividends. These additional financial rewards are tied to the profits of a company, and reward the stockholders with a per-share monetary amount. Among the top-yielding dividend stocks in the fall of 2010 were Barnes & Noble, H&R Block and Sysco Corp.



General Electric – Stock, Retrieved November 16, 2010 from

General Electric – Ownership Profile, Retrieved November 16, 2010 from

Wall Street Journal – “Top-Yielding Stocks”, November 16, 2010, Retrieved November 16, 2010 from

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