Economics
Capital Market
The capital market is a financial market where long-term debt or equity-backed securities are bought and sold. It provides a platform for businesses and governments to raise funds by issuing stocks and bonds, and for investors to buy and sell these securities. The capital market plays a crucial role in allocating financial resources and facilitating economic growth.
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5 Key excerpts on "Capital Market"
eBook - PDFGlobal Capital Flows to Infrastructure Investments
The Institutional Investors' Perspectives
- (Author)
- 2014(Publication Date)
- Cuvillier Verlag(Publisher)
The borrowers (governments, businesses, and people who spend more than their income) borrow the savers’ investments that have been entrusted to the Capital Markets (Woepking, 2009). Capital Markets, allow borrowers (both public and private), whose credit worthiness is more easily assessable, to obtain funds directly, without the involvement of an intermediary. At their most basic, Capital Markets consist mainly of markets for debt and equity but, as sophistication grows, they expand to provide deep and liquid secondary markets, and to encompass other financial products, such as derivatives (RBAB, 1995). The primary role of the Capital Market therefore, is allocation of ownership of the economy’s capital stock. In general terms, the ideal is a market in which prices provide accurate signals for resource allocation; that is, a market in which firms can make production-investment decisions and investors can choose among the securities that represent ownership of firms’ activities under the assumption that security prices at any time fully reflect all available information (Fama, 1970). Capital Markets (in contrast to money markets) deal in instruments of a year or more, and include long-term debt obligations, such as corporate and government bond and equity instruments. Compared to money markets, Capital Market instruments involve longer maturities and relatively high degrees of risk; therefore, they must provide higher rates of return for investors (Michael, 1996). Capital Markets can further be divided into a securities and a non-securities segment. Securities are more liquid than non-securities: they can be bought and sold more easily without large swings in price. For this reason, securities are attractive to individual and institutional investors.
No longer available |Learn more- (Author)
- 2014(Publication Date)
- Orange Apple(Publisher)
____________________ WORLD TECHNOLOGIES ____________________ Chapter- 11 Financial Market In economics, a financial market is a mechanism that allows people to buy and sell (trade) financial securities (such as stocks and bonds), commodities (such as precious metals or agricultural goods), and other fungible items of value at low transaction costs and at prices that reflect the efficient-market hypothesis. Both general markets (where many commodities are traded) and specialized markets (where only one commodity is traded) exist. Markets work by placing many interested buyers and sellers in one place, thus making it easier for them to find each other. An economy which relies primarily on interactions between buyers and sellers to allocate resources is known as a market economy in contrast either to a command economy or to a non-market economy such as a gift economy. In finance, financial markets facilitate: • The raising of capital (in the Capital Markets) • The transfer of risk (in the derivatives markets) • International trade (in the currency markets) – and are used to match those who want capital to those who have it. Typically a borrower issues a receipt to the lender promising to pay back the capital. These receipts are securities which may be freely bought or sold. In return for lending money to the borrower, the lender will expect some compensation in the form of interest or dividends. In mathematical finance, the concept of a financial market is defined in terms of a continuous-time Brownian motion stochastic process. Definition In economics, typically, the term market means the aggregate of possible buyers and sellers of a certain good or service and the transactions between them. ____________________ WORLD TECHNOLOGIES ____________________ The term market is sometimes used for what are more strictly exchanges , organizations that facilitate the trade in financial securities, e.g., a stock exchange or commodity exchange.
No longer available |Learn more- (Author)
- 2014(Publication Date)
- Orange Apple(Publisher)
____________________ WORLD TECHNOLOGIES ____________________ Chapter- 7 Financial Market In economics, a financial market is a mechanism that allows people to buy and sell (trade) financial securities (such as stocks and bonds), commodities (such as precious metals or agricultural goods), and other fungible items of value at low transaction costs and at prices that reflect the efficient-market hypothesis. Both general markets (where many commodities are traded) and specialized markets (where only one commodity is traded) exist. Markets work by placing many interested buyers and sellers in one place, thus making it easier for them to find each other. An economy which relies primarily on interactions between buyers and sellers to allocate resources is known as a market economy in contrast either to a command economy or to a non-market economy such as a gift economy. In finance, financial markets facilitate: • The raising of capital (in the Capital Markets) • The transfer of risk (in the derivatives markets) • International trade (in the currency markets) – and are used to match those who want capital to those who have it. Typically a borrower issues a receipt to the lender promising to pay back the capital. These receipts are securities which may be freely bought or sold. In return for lending money to the borrower, the lender will expect some compensation in the form of interest or dividends. In mathematical finance, the concept of a financial market is defined in terms of a continuous-time Brownian motion stochastic process. Definition In economics, typically, the term market means the aggregate of possible buyers and sellers of a certain good or service and the transactions between them. ____________________ WORLD TECHNOLOGIES ____________________ The term market is sometimes used for what are more strictly exchanges , organizations that facilitate the trade in financial securities, e.g., a stock exchange or commodity exchange.
eBook - PDFFinancial Institutions
Markets and Money
- David S. Kidwell, David W. Blackwell, David A. Whidbee, Richard W. Sias(Authors)
- 2020(Publication Date)
- Wiley(Publisher)
The chapter begins with a discus- sion of the function of the major participants in Capital Markets. We then turn our discussion to the bond markets: the markets for long‐term Treasury and agency securities, state and local government tax‐exempt bonds, and corporate bonds. We then discuss junk bonds, the securitization of debt, and the globalization of long‐term debt markets. Finally, we look at institutional arrangements that increase the market efficiency of Capital Markets such as regulatory bodies and the bond‐rating agencies. The market for mortgages is discussed in Chapter 9, and the market for equities is discussed in Chapter 10. ■ L E A R N I N G O B J E C T I V E S 1 Explain the role and function of Capital Markets. How does their role differ from that of the money markets? 2 Explain what STRIPs are and how they can be helpful in immunizing a bond portfolio against interest rate risk. 3 Discuss how the municipal bond market differs from the market for corporate bonds and the instruments traded in each market. 4 Explain what junk bonds are and why the market for them developed in the late 1980s. 5 Explain what is meant by the term securitization of debt. 6 Identify some of the reasons that bond markets are becoming global. 7 Discuss how the bond markets were affected by the global financial crisis of 2007–2008. 221 222 CHAPTER 8 Bond Markets finance capital goods with long‐term debt or equity to lock in their borrowing cost for the life of the project and to eliminate the problems associated with periodically refinanc- ing assets. For example, a firm buys a plant with an expected economic life of 15 years. Because short‐term rates are typically lower than long‐term rates, at first glance, short‐term financ- ing may look like a real deal. However, if interest rates rise dramatically, as they did in the early 1980s, the firm may find its borrowing cost skyrocketing as it has to refinance its short‐ term debt.
eBook - PDF- Steven A. Greenlaw, David Shapiro, Daniel MacDonald(Authors)
- 2022(Publication Date)
- Openstax(Publisher)
The profit trend has since continued to increase each year, though at a less steady or consistent rate. (Source: Federal Reserve Economic Data (FRED) https://research.stlouisfed.org/fred2/series/CPATAX) Many firms, from huge companies like General Motors to startup firms writing computer software, do not have the financial resources within the firm to make all the desired investments. These firms need financial capital from outside investors, and they are willing to pay interest for the opportunity to obtain a rate of return on the investment of that financial capital. On the other side of the financial Capital Market, financial capital suppliers, like households, wish to use their savings in a way that will provide a return. Individuals cannot, however, take the few thousand dollars that they save in any given year, write a letter to General Motors or some other firm, and negotiate to invest their money with that firm. Financial Capital Markets bridge this gap: that is, they find ways to take the inflow of funds from many separate financial capital suppliers and transform it into the funds of financial capital demanders desire. Such financial markets include stocks, bonds, bank loans, and other financial investments. Click to view content (https://openstax.org/books/principles-economics-3e/pages/17-introduction-to- financial-markets) Corporate Profits After Tax (Adjusted for Inventory and Capital Consumption) 408 17 • Financial Markets Access for free at openstax.org LINK IT UP Visit this website (http://openstax.org/l/marketoverview) to read more about financial markets. Our perspective then shifts to consider how these financial investments appear to capital suppliers such as the households that are saving funds. Households have a range of investment options: bank accounts, certificates of deposit, money market mutual funds, bonds, stocks, stock and bond mutual funds, housing, and even tangible assets like gold.
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