Why is stock exchange called a barometer of the economic and business conditions in a country?

Stock exchanges are not only used as a platform in order to carry business transactions but they are the barometers that helps in indicating the general conditions of the business atmosphere. One can measure the economic and business conditions with the help of stock exchanges as they provide real and accurate information about the companies. Prices of securities rise during economic and business prosperity periods. When economic stagnation occurs or business activities slowdown due to depression in the markets, prices fall. Security prices change with the change in economic, social and political conditions.

 

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