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What is the capital market? How is the primary market different from the secondary market? In your opinion, are these markets efficient? Why?

Capital markets are markets for long term securities based on the date of original issue. These are most commonly know as the stock markets, aka Wall Street. The capital market can be used to raise capital through instruments such as corporate bonds and financial leases. The capital market is made up of both Organized Security Exchanges and Over-The-Counter Markets. Some of the Organized Security Exchanges include the New York Stock Exchange and the American Stock Exchange. There are different benefits to being a member of a security exchange.

There are a few ways in which the primary and secondary market differs from one another. The most obvious difference is that the primary market is where organizations go to sell securities when they are issued for the first time and secondary markets are where securities are sold when they are not originally issued by the organization. Another difference of these two markets is that the issuing organization will see the cash flow from the sake of securities in the primary market; however, only the owner of the stock will see the cash flow from the sale of the security in the secondary market.

From a private investor’s standpoint, the primary and secondary market may not be considered an efficient market. An efficient market is when "the values of all assets and securities at any instant in time fully reflect all available public information. In other words, if I was a private investor, I would be hesitant to use the two markets as an efficient decision-making tool because there is just too much that is still unknown. On the reverse side, I do believe that these two markets are an efficient way to make capital for an organization and to keep interest in what the organization is doing. That is, if people believe in an organization, they will spend their money to purchase stocks, bonds, etc and as people become aware of the organization and wish to support it, they will help the stocks retain an increase in value, thus increasing stockholder wealth and keeping the stockholders happy.

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