Capital market and money market pdf
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- Money Market vs Capital Market
- Financial market
- Money and Capital Market Analysis: Twins Comparison (Cameroon and Ivory Coast)
- Money Market and Capital Market Notes
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The primary role of the capital market is to raise long-term funds for governments, banks, and corporations while providing a platform for the trading of securities. Money Market is a market for short-term financial assets that can be turned over quickly at a low cost. A short-term financial asset in this context may be construed as any financial asset which can be quickly converted into money with minimum transaction cost within a period of one year.
Money Market vs Capital Market
This research tests the premium hypothesis of illiquidity by using U. Treasury securities intraday interdealer data. In contrast to the existing literature where notes are matched with bills in terms of maturity date, this research compare notes with other notes maturing on the same day. One reason for comparing notes with notes rather than notes with bills is that differences in tax treatment across bills and notes could confront an experiment to measure the effect of illiquidity.
This research found that notes are quoted at essentially identical prices despite substantial differences in their liquidity. The result of previous studies Amihud and Mendelson, is in sharp contrast to the rejection of the hypothesis. Therefore the evidence that reconsidered based on matched bills and notes. This research identify cross-sectional variation in bill-note pricing differences that cannot be supported by the premium hypothesis of illiquidity.
The pricing difference is smaller for matches with on the run bills, although the difference in liquidity between these bills and notes is significantly larger. Investmentso Dimson et. Taking U. T-bills government bonds as the risk-free asset, the world index was 4. This research include a report of the historical equity premium for each market in local currency and US dollars, and decompose the premium into dividend growth, multiple expansion, the dividend yield, and changes in the real exchange rate.
It has approximately the same mean return as a T-bill and bears no market risk. Silver also bears no market risk but has returns inferior to T-Bills. Both gold and silver show evidence of inflation-hedging ability, with the case that gold there is considerable variation across countries, the equity realized risk premium was substantial everywhere.
The research found that the equity premium relative to Treasury bills was an annualized 4. Hypothesis No. The study used the survey method to describe and analyze the risk and return Money and Capital Market. Although there are many components to a financial market, two of the most commonly used are money markets and capital markets.
Financial Institutions and financial marketFinancial institutions are intermediaries that channel the savings of individuals, businesses, and governments into loans or investments; The difference in the money needs is a leads to the emergence of variation in financing needs and is something which has led to the emergence of money and capital market, the first regard to fill the short-term financing gap and the second regard to bridge the long-term financing gap.
Definition of money market:The money market has traditionally been defined as the market for marketable short term securities. It has deep historical roots. Today, it is not an illuminating definition. The genesis of interest rates does not originate in market for marketable short-term securities which is the quintessence of monetary policy implementation. It is found in the non-marketable interbank debt market. Money creation is firmly in the province on the money market that is new bank lending and its corollary bank deposit creation.
As a result of these, we offer an alternative definition of the money market; it is an understatement to show that the money market is a significant part of the financial system. It is the essence of the financial system. It is the market where short-term lending and borrowing meet each other, in which the central bank implements monetary policy, where interest rates have their genesis, and where the new money creation is done.
However; that they can be sold to another investor if the owner needs to cash in the certificate before its date of maturity. Short-term CDs are highly marketable, al-though the market significantly thins out for three months or more maturities. The Commercial Paper: companies that are largely well-known often issue their own unsecured short-term debt notes rather than borrowing directly from banks.
These notes are called commercial paper. Very often, commercial paper is backed by a bank line of credit, in which the borrower can access to cash that can be used if needed to pay off the paper at maturity. A banker's acceptance: starts as an order to a bank by a bank's customer to pay a sum of money at a future date, typically within six months. At this stage, it is similar to a postdated check.
When the bank endorses the order for payment as "accepted," it assumes ultimate payment responsibility to the holder of the acceptance. Eurodollars: are dollar-denominated deposits at foreign banks or foreign branches of American banks.
By locating outside the United States, these escape regulation of banks by the Federal Reserve Board. Despite the tag "Euro," these accounts need not be in European banks, although that the accepting dollar-denominated deposits practice outside the United States began. Definition of capital market :The capital market is designed to finance long term investments by businesses, households, and governments. Trading of funds in the capital market makes the construction of factories, highways, schools, and homes possible.
Families and individuals, for example, tap the capital market when they borrow to finance a new home. Governments rely on the capital market for funds to build schools, highways, and provide the public with essential services. The most important borrowers in the capital markets are businesses of all size that issue long term IOUs to cover the equipment purchase and the construction of new facilities. Ranged against these many borrowers in the capital market are financial institutions, such as insurance companies, mutual funds, security dealers, and pension funds that the bulk of capital market funds are supplied with.
Rose p. For example, one of the largest capital market segments is devoted to commercial mortgage and residential loans to support the building of homes and business structures, such as shopping centers and factories.
State and local governments sell their tax exempt municipal bonds in another sector of the capital market in the USA. Households families and individuals around the world another segment loan in yet, using loans of consumer to make purchases range from auto to home appliances. In Eurobonds, Euro notes the large corporations make a borrowing from an international capital market. Probably the capital market best known segment is the market for corporate stock represented by the major exchanges, such as the London stock exchange, the New York stock exchange NYSE and the Tokyo exchange.
The Capital Asset Pricing Model [CAPM]The capital asset pricing model CAPM was developed by Sharpe, Lintner and Mossin ; Each one individually , The CAPM is one of the fundamental and most influential concepts in modern finance, it is a single-facto linear model security market line that relates the expected returns of an asset and a market portfolio, in which the slope, called asset beta, serves as a measure of asset non-diversifiable A.
The Government's commitment to fiscal discipline is important to achieve this objective. The CBE intends to adopt a full-fledged inflation targeting regime once the fundamental prerequisites are met.
Test Hypothesis No. According to Pearson Correlation Test in table , the correlation is positive relationship between returns money and capital market, these is Theoretical Results The purpose of a financial market is to transfer liquidity and distribution risk. Financial institutions are intermediaries that channel the savings of individuals, businesses, and governments into loans or investments. The difference in the money needs is a leads to the emergence of variation in financing needs and is something which has led to the emergence of money and capital market, the first regard to fill the short-term financing gap and the second regard to bridge the long-term financing gap.
Financial markets can be classified into two main groups; it is money and capital market. The Function of MoneyFigureFigure This research provides a methodology for estimating the risk premium of the market that based on the underlying process governing the level of volatility of the market. This model provides a test for a structural shift in the historical risk premium and an unbiased estimate of its value. In the volatility process, it provides assurance of a structural shift following the s that implies an upward bias in ex post realized returns during the subsequent period.
The estimation of the market risk premium -controlling for this bias-for the period after is 5. The prices of both metals are cointegrated with consumer prices, showing additional evidence of hedging ability. The research runs from to the start of While finance models: the Capital Asset Pricing Model.
Practitioners and academics tend to use either long-term Treasury bonds or short-term T-bills as the risk-free security without empirical justification. This research investigates the market and inflation risks of Treasury securities with different maturity dates over different investment horizons.
The results show that mean real returns, volatility, and market and inflation risks, of Treasury securities increase according to the maturity period. Only Tbills do not have any market risk for 1-and 5-year periods, and they have the lowest risk of market over 10 years.
Although Treasury securities of all maturities have significant inflation risk, T-bills have the lowest risk of inflation over all horizons. Further, the systematic risk of inflation and inflation explanatory power for real T-bill returns decline with the investment horizon.
These findings indicate that T-bills are better proxies for the risk-free rate than longer-term Treasury securities regardless of the investment horizon. Is there a relationship between Money and Capital Market return? Is there a relationship between Money and Capital Market risk? T-bills represent the borrowing simplest form: The government raises money by selling bills to the public. A certificate of deposit: or CD, is a time deposit with a bank.
Time deposits may not be withdrawn on demand. The depositor is being paid interest and principal from the bank only at the end of the fixed term of the CD article by Markowitz, The publication in "Portfolio Selection" in The Journal of Finance, without doubt, the beginning of the classic theory of portfolios.
This work is the first time to analyzes the relationship between return and risk in a financial model S. Cruz Rambaud et al. In this model, Markowitz established that the risk of a portfolio is lower than the average of the risks of each asset taken individually and gave quantitative evidence of the contribution of diversification. EGX started disseminating its index on 2 February via data vendors, its publications, web site, newspapers etc.
Figure Figure 33Figure The Egyptian inflation rate from to Figure 33interest rate in year that is equal
A financial market is a market in which people trade financial securities and derivatives at low transaction costs. Some of the securities include stocks and bonds , raw materials and precious metals , which are known in the financial markets as commodities. The term "market" is sometimes used for what are more strictly exchanges , organizations that facilitate the trade in financial securities, e. Much trading of stocks takes place on an exchange; still, corporate actions merger, spinoff are outside an exchange, while any two companies or people, for whatever reason, may agree to sell stock from the one to the other without using an exchange. Trading of currencies and bonds is largely on a bilateral basis, although some bonds trade on a stock exchange, and people are building electronic systems for these as well, to stock exchanges. There are also global initiatives such as the United Nations Sustainable Development Goal 10 which has a target to improve regulation and monitoring of global financial markets.
Money and Capital Market Analysis: Twins Comparison (Cameroon and Ivory Coast)
This study is a comparative analysis of the effects of money and capital markets on the Ghanaian economy covering the period from to using the dynamic Auto Regressive Distributed Lag ARDL framework. Empirical results confirmed the existence of a unique and stable long-run relationship between the money market, capital market and economic growth. In respect of money market indicators, findings confirmed that monetary policy and treasury bills rate have had negative but significant impact on growth in the short- and long-run respectively. More so, total liquidity negatively and significantly influenced the Ghana-ian economy both in the short- and in the long run. Both market capitalisation and total value of stock traded, as proxies of capital market, had positive and significant effects on short-run growth, while both indicators as well as stock market turnover negatively and insignificantly affected long-run growth.
Money Market and Capital Market Notes
A capital market is a financial market in which long-term debt over a year or equity -backed securities are bought and sold. Securities and Exchange Commission SEC oversee capital markets to protect investors against fraud, among other duties. Modern capital markets are almost invariably hosted on computer-based electronic trading platforms ; most can be accessed only by entities within the financial sector or the treasury departments of governments and corporations, but some can be accessed directly by the public. As an example, in the United States, any American citizen with an internet connection can create an account with TreasuryDirect and use it to buy bonds in the primary market, though sales to individuals form only a tiny fraction of the total volume of bonds sold. Various private companies provide browser-based platforms that allow individuals to buy shares and sometimes even bonds in the secondary markets. There are many thousands of such systems, most serving only small parts of the overall capital markets.