The capital market is an important element of the financial and monetary system within the economy sector. It is the general name of the markets where long-term securities such as all kinds of bonds and stocks are bought and sold. In other words, the capital market deals with long-term investment markets with explicit or implicit demands. Long-term investments basically refer to investments with a carrying period of one year or more. Accordingly, the purchase and sale of both capital and debt instruments such as stocks, bonds, secured premium securities are within the scope of the capital market.
What are the Functions of the Capital Market?
The capital market, which is one of the measures of the internal power of the economy, provides many facilities to countries. It is one of the solid sources of finance for companies. It also encourages investors to make the right investment. Thus, it prepares the ground for capital formation in the economy. It pioneers the initiation of savings mobilisation to finance long-term investments, which are the focal point. Thus, it leads to the rapid utilisation of these financial instruments. It stimulates the competitive price mechanism in order to activate capital distribution.
What are the Types of Capital Markets?
The capital market can be analysed under two headings: primary and secondary markets. The primary market is the market where new securities are bought and sold for the first time. Here, the correct issuance, private placement and prospectus methods are used to mobilise funds. The secondary market, on the other hand, is the market where securities previously traded in the primary market are also subject to activity. Therefore, the secondary market is a kind of old securities market.