A question often asked is what happens to the money “tied up” in the stock market during crashes. Substack economics writer Noah Smith provides an answer this question using an example: Suppose there are 1 million total shares of stock in Noahcorp, but that only 1000 shares of Noahcorp get traded on any particular day. And most Noahcorp shares just sit in people’s accounts and never even get traded at all. Now suppose that the 1000 shares that DO get traded go for $300 a share. Mark-to-market accounting means that we value all 1 million Noahcorp shares at $300 a share, including all the ones that never get traded. So the total value of all 1 million shares of Noahcorp — which is called Noahcorp’s “market capitalization” or “market cap” — is $300 million.
I wonder what would happen if stock buybacks were made illegal?
Dividends would increase, or stocks would go down, or both.
You might be interested in Doug Henwood's book if you haven't read it https://hbr.org/2012/08/the-wall-street-book-everyone
Thanks. Looks right up my alley.