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Let's say I wanted to create my own financial market where people could buy with real money shares in a real physical product such as, for example, a rock band. If the value of the rock band goes up, so do the investors shares, if the value of the rock band goes down, etc.

Is this feasible? Any links to resources on this?


EDIT 1

I used the example of a rock band because I was inspired by this article, but I think this could apply to virtually anything. People value different things for different reasons. A rock band could be considered valuable because it gives returns on it's revenue, but also maybe just because a fan gives value to 'owning' a share in their favorite artist. Granted a rock band is maybe not the best example, so let's not go too far with this.

How about an antique? This is something that people could make money on if they sell shares in an object whose worth has for whatever reason increased in value since the time of their initial investment.

I was thinking of something similar to ebay, but where the users bid on shares of an object that they never receive. An antique could sit in a museum and the shares could be sold to people who bid on it according to what they think it is currently worth.


EDIT 2

Okay, so there has already been a lot of great comments and answers to this question. And the explanations of the principals of the market system are helpful. But I guess what I was really wondering was if there are any legal limitations. This may be too broad to answer here, but any insights or links to resources would be appreciated.

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Hi Eric, would you mind explaining how a rock band constitutes a "real physical product." Since one cannot buy people for ethical reasons, all that's left is the "idea" of the rock band, which is hardly "physical". Why would anyone buy this idea? Will they get a share of some revenue stream? If so, how is this any different from buying shares in any other corporation? –  Tal Fishman Mar 26 '12 at 16:29
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How is the "value" of the rock band observable? Do you mean the band's revenue (concert receipts, music royalties, etc)? If so it sounds like you want a publicly traded equity backed by the band's cash flow. On a related note, Cantor created a futures exchange to represent box-office receipts for a movie. The plan was initially approved by regulators, from what I recall, but then faced too much resistance from other stake holders for it to take off. –  chrisaycock Mar 26 '12 at 16:50
    
@chrisaycock Thanks! –  Eric Brotto Mar 26 '12 at 17:19
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Alright, I'm going to issue a warning here. This site is intended for professionals in quantitative finance. You aren't a professional and this question isn't quantitative finance. (See the FAQ.) I'll leave this open for the moment, but your edits keep pushing past the bounds of what this site is for. –  chrisaycock Mar 26 '12 at 22:33
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I think this belongs to Money.SE, for sure not Quant.SE. Not a long time ago this would have been closed immediately. I'm surprised there are no close votes yet. To the OP: it's nothing personal - just seems like a good question in a bad place. –  Karol Piczak Mar 27 '12 at 22:07
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1 Answer

As Tal Fishman and chrisaycock said in their comments, you need to have a possible economic gain (or a physical delivery) coming from the underlying (in your example a rock band) that motivates the investor to acquire shares.

What you suggest has already been done in France, through the website MyMajorCompany.com where you can buy a "share" of artists (music, comics designers, ...) which will give you the right to claim part of the artist's revenue from a concert, an album, and so on. There is also a website called Private Joke where you can invest in the same way on humorists.

Note that you also have example of exchanges where the underlying is not really a "share" but a possible income in gifts or in money depending on whether an event occurs or not. A well-known example is Betfair, an exchange specialized on sports betting. Eurosport (a European sport TV channel) also had a contest for the football world cup where you could buy "shares" of football teams prior and during the tournament, and where the owners of the winning teams in the end received gifts such as cars or TVs.

If you have not contact with the rock band, or the rock band is not willing to share its shares, you won't really be able to create such an exchange.

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Those truly interested in this topic should also check out intrade.com, which hosts a variety of bets on all sorts of publicly verifiable events. If you have a bright idea, they even accept suggestions. –  Tal Fishman Mar 26 '12 at 18:28
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