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May 31, 2006

Electronic trading in the stock market

Online stock trading is now common and easy. N.C. State University economist Mike Walden explores how computers and technology have affected the stock market.

"Some say that it’s impacted it negatively because it has made the stock market more volatile. With more trading [and] people being able to act on information more quickly, that can cause bigger ups and downs in the stock market," says Dr. Walden, an economist with the North Carolina Cooperative Extension Service.

"On the other hand, some economists say, 'Well, that may be true, but it is actually making the market more efficient' because for the stock market to be efficient -– and by 'efficient' we mean that information about stocks and companies gets out quickly to buyers and people interacting with the stock market.

"By making that market more efficient you do allow people to have more power. They don’t, for example, have to rely on professional brokers. They can get that information right there on the desktop and act on it.

"And also this efficiency decreases the likelihood of a small group of investors being able to corner the market because only they have the information.

"So this may be another example where technology has created power for individuals."

Posted by deeshore at May 31, 2006 08:00 AM

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