What is a capital market?
A capital market is where stocks and bonds are bought and sold by companies, governments and investors.
The stocks and bonds in a capital market are medium to long term, meaning the investment is typically secured for more than a year.
Where have you heard about capital markets?
As ‘capital market’ is an overarching term, you’re probably more familiar with specific market names, such as the London Stock Exchange.
Capital markets play a significant part in economics as they supply funding for long-term investment and improvement which contributes to economic growth.
What you need to know about capital markets...
Capital markets are split into two:
Primary markets are where newly issued stocks and bonds are bought and sold. This is used by companies and governments to raise funds. Investors buy directly from the issuer.
Secondary markets are where existing stocks and bonds are bought and sold. The assets here are much more varied and investors buy from other investors.
Although stocks and bonds are sold in both markets, the secondary market is the one that is most commonly known as the 'stock market'.
Capital markets are supervised by financial regulators such as the Bank of England and the US Securities and Exchange Commission.