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What is the Capital Market?

The stock market is part of a capital market.
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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 16 June 2014
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When referring to a capital market, it is important to note that the term can refer to a rather broad range of products and services that are associated with finances and investments. To that end, a capital market will include such components as the stock market, commodities exchanges, the bond market, and just about any physical or virtual facility or medium where debt and equity securities can be bought or sold.

As a market for securities with a very broad reach, the capital market is an ideal environment for the creation of strategies that can result in raising long-term funds for bond issues or even mortgages. At the same time, it provides the medium for short-term fund strategies as well. Essentially, any type of financial transaction that is meant to result in the buying and selling of securities and commodities for profit can rightly be considered part of this market.

Institutions are also part of the framework of the capital market. Stock exchanges are one of the more visible examples of established operations in it. Along with the stock exchanges, support organizations such as brokerage firms also form part of the capital market. Over the counter markets are also included. By providing the mechanisms that make trading possible, these institutions make it possible to keep the process ethical and more easily governed according to local laws and customs.

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Because of the broad structure of the capital market, investors of all types have the opportunity to participate in financial strategies that can strengthen the general economy as well create financial security. Persons who wish to focus on investment opportunities that are very stable and more or less ensure a modest return can find plenty of different offerings to choose from. At the same time, investors who tend to be more adventurous can also find a wide array of investment types that will allow them to take some additional risk and possibly realize larger returns on their investments. While the overall structure of the capital market may be broad, there are a number of checks and balances that help to keep the market on an even keel, ensuring that it functions in a manner that is both ethical and legal.

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Discuss this Article

anon111799
Post 11

what are the features of capital market?

anon98444
Post 10

list down the major roles of capital market?

anon89067
Post 9

what is an example of investments that are not capital markets?

anon74635
Post 8

What is an efficient capital market and why is it important for capital market to be efficient?

anon58133
Post 7

how is equity capital raised in a capital market?

anon56717
Post 6

what is the capital market structure?

anon41120
Post 5

what is the difference between internal capital market and external capital?

anon41119
Post 4

Given the near breakdown of key sectors of the American market, one might expect Asians to bring their money home. Quite the opposite has happened: Asian currencies have fallen sharply against the American dollar.

On my desk is a draft paper by a prominent Asian politician, sent to me privately for comment. It calls on Asians to take charge of their own financial destiny and invest their money in Asian markets rather than into the maelstrom of American markets. Privately, I advised the leader in question not to publish it.

ntzaman
Post 3

why do people like the capital market

anon30932
Post 1

What are the main roles of the capital market?

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