The following section focuses on how the markets themselves function. Understanding how the markets function is key in determining how securities themselves function.

It is unlikely that your CFA Level 1 exam will test you directly on the topics presented, as the material itself is quite simplistic. However, you will be asked several comprehensive questions on this material.

CHARACTERISTICS
The characteristics of a well-functioning securities market are:

  • Efficient - Internal - Markets must be efficient internally.
  • Efficient - External - Markets react quickly to new news; existing prices reflect all available information.
  • Liquidity - Markets are liquid and as such, assets can be bought or sold easily. There are numerous buyers and sellers giving depth to the market.
  • Continuity - In the context of liquidity, prices do not change substantially from one transaction to another unless significant new news arises.
  • Marketability - In the context of liquidity, marketability is the ability to sell an asset quickly.
  • Timely and accurate information - New information is brought to the market in a timely and accurate way.


Issuing Bonds

Related Articles
  1. Personal Finance

    What's the SEC?

    The Securities and Exchange Commission (SEC) is an independent agency of the United States government. The mission of the SEC is to enforce securities laws passed by congress. These laws aim ...
  2. Investing

    Understanding Liquidity Risk

    Make sure that your trades are safe by learning how to measure the liquidity risk.
  3. Investing

    Understanding Financial Liquidity

    Understanding how this measure works in the market can help keep your finances afloat.
  4. Investing

    Understanding Liquidity Risk

    Learn about the two types of liquidity risk: funding liquidity risk and market liquidity risk.
  5. Financial Advisor

    Tips on Passing the CFA Level I on Your First Attempt

    Obtain valuable tips and helpful study instructions that can help you pass the Level 1 Chartered Financial Analyst exam on your first attempt.
  6. Managing Wealth

    What Does Liquidation Mean?

    Creditors liquidate assets to try and get as much of the money owed to them as possible.
  7. Investing

    The Upside of Picking Stocks Nobody Follows

    Learn about the upside of picking stocks nobody follows. The less followed a stock, the more opportunity there is for a stock being incorrectly priced.
  8. Investing

    Financial Markets: Capital Vs. Money Markets

    Two commonly used components of the financial market are money markets and capital markets. Find out the similarities and differences between them.
  9. Investing

    The Bloomberg Terminal: Step By Step

    Bloomberg is synonymous with investment information- its media outlet and software/hardware are used by most, if not all, professional money managers.
Frequently Asked Questions
  1. What are Common Examples of Monopolistic Markets?

    Discover what causes real instances of market monopoly, how it persists and where monopoly privilege is most common in the ...
  2. What is the gold standard?

    The gold standard is a monetary system where a country's currency or paper money has a value directly linked to gold, but ...
  3. What's the most expensive stock of all time?

    The most expensive publicly traded stock of all time is Warren Buffett’s Berkshire Hathaway.
  4. What is a "socially responsible" mutual fund?

    As the name suggests, socially responsible mutual funds invest exclusively in socially responsible investments.
Trading Center