The spelling of the term "capital market" is easy to understand with its IPA phonetic transcription /ˈkæpɪtl ˈmɑːrkɪt/. The first syllable is pronounced with a short "a" sound, followed by a "p" and "i" sound, and "tl" sound at the end. For the second syllable, we have a long "a" sound, followed by a "r" and "k" sound, and "ɪt" sound at the end. A capital market is a financial market where companies and governments can raise funds from investors by issuing and trading securities such as stocks and bonds.
Capital market refers to a financial market where individuals, institutions, and companies can buy and sell financial securities, such as stocks, bonds, and derivatives. It is a platform for long-term investment and raising capital for various purposes.
In the capital market, companies and governments raise funds by selling securities to investors, allowing them to finance their operations, projects, or investments. Investors, on the other hand, invest their surplus funds in these securities in hopes of earning returns in the form of dividends or capital gains. This market facilitates the transfer of funds from savers to borrowers, promoting economic growth and development.
The capital market is usually divided into two major segments: the primary market and the secondary market. In the primary market, new securities are issued and sold to investors directly by the issuers. This is where initial public offerings (IPOs) take place. The secondary market, on the other hand, involves the trading of existing securities among investors, facilitating their liquidity.
Various participants operate within the capital market, including stock exchanges, investment banks, brokers, and individual investors. These participants play crucial roles in providing a fair and transparent trading environment, facilitating efficient price discovery, and ensuring sufficient liquidity in the market. Additionally, regulatory bodies and market authorities oversee and regulate the capital market to maintain investor confidence, protect their interests, and prevent fraudulent activities. Overall, the capital market serves as a key component of the financial system, contributing to economic growth and providing opportunities for investment and capital formation.
The word "capital" in "capital market" comes from the Latin word "capitalis", which means "of the head" or "related to the head". In ancient Rome, "capitalis" was used to describe a person's life or head, and it eventually evolved to refer to one's financial assets and investments.
The term "market" can be traced back to the Latin word "mercatus", which means "a buying and selling". It refers to a place where goods, services, and securities are traded.
The combination of "capital" and "market" in "capital market" reflects the nature of the financial system where stocks, bonds, commodities, and other financial instruments are bought and sold to raise capital for companies and governments.