Complete Guide To Corporate Finance

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Capital Market History - Introduction To Capital Markets History

Both the stock and bond markets are a part of the capital markets. Any government or corporation requires capital (funds) to finance its operations and to engage in its own long-term investments. To acquire these funds, a company raises money through the sale of securities - stocks and bonds in the company's name. For example, when a company conducts an initial public offering (IPO), it is tapping the investing public for capital and is therefore using the capital markets. When a country's government issues Treasury bonds in the bond market to fund its spending initiatives, it is also using the capital markets. (Read more about initial public offerings in Top IPO Nations and The Biggest IPO Flops.) When companies and governments sell securities, they do so in the primary market. When investors trade these securities on exchanges and over the counter, it's called the secondary market. Thus, both the primary and secondary markets for stocks and bonds make up the capital markets. The capital markets are extensively regulated; in the United States this regulator is the Securities and Exchange Commission (SEC).

In this section, we'll examine the factors that affect stock and bond returns, the history of these markets, how they have performed and what influences performance.


Risk And Returns


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RELATED TERMS
  1. Capital Markets

    Capital markets are markets for buying and selling equity and ...
  2. Offering

    The issue or sale of a security by a company. It is often used ...
  3. Issue

    1. The process of offering securities as an attempt to raise ...
  4. Initial Public Offering - IPO

    The first sale of stock by a private company to the public. IPOs ...
  5. Bond

    A debt investment in which an investor loans money to an entity ...
  6. Government Bond

    A debt security issued by a government to support government ...
RELATED FAQS
  1. When does a primary market become a secondary market?

    Understand the difference between the primary and secondary markets and why the secondary market is where investors go to ... Read Answer >>
  2. What's the difference between primary and secondary capital markets?

    Learn how in the primary capital market, securities are issued for the first time, while in the secondary market, investors ... Read Answer >>
  3. Why are simple-interest loans preferred by payday loan companies and pawn shops?

    Learn how you can invest in the corporate bond market without investing a large amount of capital through bond funds and ... Read Answer >>
  4. Why are most bonds traded on the secondary market "over the counter"?

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  5. What forms of debt security are available for the average investor?

    Discover the various different types of debt securities, issued by government entities or corporations, that are available ... Read Answer >>
  6. What is the difference between the bond market and the stock market?

    The bond market is where investors go to trade (buy and sell) debt securities, prominently bonds. The stock market is a place ... Read Answer >>
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