Meaning of capital market
"Just to clarify, In wikipedia when it says  It is defined as a market in which money is provided for periods longer than a year They are referring to the company which is asking for money. So for example the stock market provides money to the issuing company of an IPO, indefinitely. Meaning the company that just went public is provided with money for a period longer than a year. The definition in Investopedia basically says the same thing Wikipedia does it is just phrased slightly different and leaves out the ""for periods longer than a year"".  For example Wikipedia uses the term ""business enterprises"" and ""governments"" while Investopedia uses the term private sector and public sector, in this context ""business enterprise"" is ""private sector"" and ""governments"" is ""public sector""  So in the sense of the length debt is issued yes, money market would be the opposite of a capital market but both markets still offer a place for governments and companies to raise money and both are classified as financial markets." "1) Are the definitions for capital market from the two sources the same? Yes.  They are from two different perspectives.  Investopedia is looking at it primarily from the perspective of a trader and they lead-off with the secondary market. This refers to the secondary market: A market in which individuals and institutions trade financial securities. This refers to the primary market: Organizations/institutions in the public and private sectors also often sell securities on the capital markets in order to raise funds. Also, the Investopedia definition leaves much to be desired, but it is supposed to be pithy.  So, you are comparing apples and oranges, to some extent.  One is an article, as short as it may be, this other one is an entry in a dictionary. 2) What is the opposite of capital market, according to the definition in investopedia?  It's not quite about opposites, this is not physics.  However, that is not the issue here.  The Investopedia definition simply does not mention any other possibilities.  The Wikipedia article defines the term more thoroughly.  It talks about primary/secondary markets in separate paragraph. 3) According to the Wikipedia's definition, why does stock market belong to capital market, given that stocks can be held less than one year too? If you follow the link in the Wikipedia article to money market: As money became a commodity, the money market is nowadays a component of the financial markets for assets involved in short-term borrowing, lending, buying and selling with original maturities of one year or less. The key here is original maturities of one year or less. Here's my attempt at explaining this: Financial markets are comprised of money markets and capital markets.   Money is traded as if it were a commodity on the money markets.  Hence, the short-term nature in its definition.  They are more focused on the money itself.     Capital markets are focused on the money as a means to an end. Companies seek money in these markets for longer terms in order to improve their business in some way. A business may go to the money markets to access money quickly in order to deal with a short-term cash crunch.  Meanwhile, a business may go to the capital markets to seek money in order to expand its business. Note that capital markets came first and money markets are a relatively recent development.   Also, we are typically speaking about the secondary (capital) market when we are talking about the stock or bond market.  In this market, participants are merely trading among themselves.  The company that sought money by issuing that stock/bond certificate is out of the picture at that point and has its money.   So, Facebook got its money from participants in the primary market: the underwriters.  The underwriters then turned around and sold that stock in an IPO to the secondary market.  After the IPO, their stock trades on the secondary market where you or I have access to trade it.  That money flows between traders.  Facebook got its money at the ""beginning"" of the process."
"Market caps is just the share price, multiplied by the number of shares. It doesn't represent any value (if people decide to pay more or less for the shares, the market cap goes up or down). It does represent what people think the company is worth.  NAV sounds very much like book value. It basically says ""how much cash would we end up with if we sold everything the company owns, paid back all the debt, and closed down the business? "" Since closing down the business is rarely a good idea, this underestimates the value of the business enormously. Take a hairdresser who owns nothing but a pair of scissors, but has a huge number of repeat customers, charges $200 for a haircut, and makes tons of money every year. The business has a huge value, but NAV = price of one pair of used scissors." It is ALWAYS possible for a company's valuation in the market to be larger than the market it serves, and in fact it is not uncommon.  There's valid argument that Uber would be a good example of this, with a market cap of more than $60 billion.  Market cap is the total value of all shares outstanding.  Keep in mind that what a company's shares  trade for is less a reflection of its past (or, to some degree, even present) revenue activity and more of a speculative bet on what the company will do in the future. "This is the best tl;dr I could make, [original](https://jacobinmag.com/2017/10/finance-capital-shareholders-profit-market) reduced by 81%. (I'm a bot) ***** &gt; The term financialization is used all over the place, but it&amp;#039;s usually defined in a pretty circular way: financialization means &amp;quot;More finance,&amp;quot; more things controlled by finance.  &gt; The role of finance in enforcing a certain kind of policy on the state, a certain kind of logic, a certain kind of organization - whether it&amp;#039;s the bond market or whoever else we imagine here - is even more clear-cut.  &gt; To me, that&amp;#039;s a narrower, more specific, and maybe more fruitful way of thinking about financialization than just &amp;quot;There&amp;#039;s more finance.""   ***** [**Extended Summary**](http://np.reddit.com/r/autotldr/comments/78t6so/the_disruptors_jacobin_magazine_via/) | [FAQ](http://np.reddit.com/r/autotldr/comments/31b9fm/faq_autotldr_bot/ ""Version 1.65, ~235206 tl;drs so far."") | [Feedback](http://np.reddit.com/message/compose?to=%23autotldr ""PM's and comments are monitored, constructive feedback is welcome."") | *Top* *keywords*: **logic**^#1 **More**^#2 **finance**^#3 **way**^#4 **corporation**^#5" Stock markets are supposed to be about investment and providing capital to companies for operations and research.  High frequency trading is only about gaming the market and nothing else.  Arguments that this provides more capital or liquidity don't make any sense because the speed of trading is such that listed companies cannot take advantage and only high frequency traders are served. "In finance, form is function, and while a reason for a trade could be anything, but since the result of a trade is a change in value, it could be presumed that one seeks to receive a change in value. Stock company There may have been more esoteric examples, but currently, possession of a company (total ownership of its' assets actually) is delineated by percentage or a glorified ""banknote"" frequently called a ""share"".  Percentage companies are usually sole proprietorship and partnerships, but partnerships can now trade in ""units"".  Share companies are usually corporations. With shares, a company can be divided into almost totally indistinguishable units.  This allows for more flexible ownership, so individuals can trade them without having to change the company contract. Considering the ease of trade, it could be assumed that common stock contract provisions were formulated to provide for such an ease. Motivation to trade This could be anything, but it seems those with the largest ownership of common stock have lots of wealth, so it could be assumed that people at least want to own stocks to own wealth. Shorting might be a little harder to reason, but I personally assume that the motivation to trade is still to increase wealth. Social benefit of the stock market Assuming that ownership in a company is socially valuable and that the total value of ownership is proportional to the social value provided, the social benefit of a stock market is that it provided the means to scale ownership through convenience, speed, and reliability." "As someone that works in and with the ag and commodity markets, my understanding, is limited but I hope it helps.   Aside from needing an infrastructure built to maintain the vast amounts of data, communication, pricing, banking information, having a closing time for our markets helps to ensure value and fair trade. Capitalism is centralized around creating a fair value for ventures to sell, where prospective buyers opt to purchase or invest. For example, where I attended university, there were many coffee shops close to campus, but only one stayed open all night, and as such had operational cost much higher than other shops, forcing them to charge more for a cup of coffee. While this example is crude, the idea is the same. By maintaining""bank"" hours, product or strategies and developments meant to increase projected value are allowed to occur.   I imagine that if the markets did not close, my coffee prices would skyrocket for an increased demand, that of which the supply chsin, and farmers, would struggle to meet. The same would be said of grain, salt, oils, etcetera." "Very often, the word secondary market is used synonymously with the stock market as we all know it.  In this case, the primary market would be the ""closed"" world of VCs, business angels, etc to which stock market investors do not have access, e.g. the securities are not trading on a public stock market." "Buying (or selling) a futures contract means that you are entering into a contractual agreement to buy (or sell) the contracted commodity or financial instrument in the contracted amount (the contract size) at the price you have bought (or sold) the contract on the contract expire date (maturity date).  It is important to understand that futures contracts are tradeable instruments, meaning that you are free to sell (or buy back) your contract at any time before the expiry date. For example, if you buy 1 ""lot"" (1 contract) of a gold future on the Comex exchange for the contract month of December 2016, then you entering into a contract to buy 100 ounces (the contract size) of gold at the price at which you buy the contract - not the spot price on the day of expiry when the contract comes to maturity.  The December 2016 gold futures contract has an expiry date of 28 December.  You are free to trade this contract at any time before its expiry by selling it back to another market participant.  If you sell the contract at a price higher than you have purchased it, then you will realise a profit of 100 times the difference between the price you bought the contract and the price you sold the contract, where 100 is the contract size of the gold contract.  Similarly, if you sell the contract at a price lower than the price you have purchased it, then you will realise a loss. (Commissions paid will also effect your net profit or loss). If you hold your contract until the expiry date and exercise your contract by taking (or making) delivery, then you are obliged to buy (or sell) 100 ounces of gold at the price at which you bought (or sold) the contract - not the current spot price. So long as your contract is ""open"" (i.e., prior to the expiry date and so long as you own the contract) you are required to make a ""good faith deposit"" to show that you intend to honour your contractual obligations.  This deposit is usually called ""initial margin"".  Typically, the initial margin amount will be about 2% of the total contract value for the gold contract.  So if you buy (or sell) one contract for 100 ounces of gold at, say, $1275 an ounce, then the total contract value will be $127,500 and your deposit requirement would be about $2,500.  The initial margin is returned to you when you sell (or buy) back your futures contract, or when you exercise your contract on expiry. In addition to initial margin, you will be required to maintain a second type of margin called ""variation margin"".  The variation margin is the running profit or loss you are showing on your open contract. For the sake of simplicity, lets look only at the case where you have purchased a futures contract.  If the futures price is higher than your contract (buy) price, then you are showing a profit on your current position and this profit (the variation margin) will be used to offset your initial margin requirement. Conversely, if the futures price has dropped below your contracted (buy) price, then you will be showing a loss on your open position and this loss (the variation margin) will be added to your initial margin and you will be called to put up more money in order to show good faith that you intend to honour your obligations.  Note that neither the initial margin nor the variation margin are accounting items.  In other words, these are not postings that are debited or credited to the ledger in your trading account.  So in some sense ""you don't have to pay anything upfront"", but you do need to put up a refundable deposit to show good faith." Most likely economics then. What I'm looking to gain is an understanding of how the market works so that I may take that knowledge and use it to make investments, buy stocks, or possibly start a business.  I have a very large amount of time between my studies for my classes and I think it would be a waste to not learn these tools (to give you a reason for my interest in this). "Market cap is speculative value, M = P * W, where W is stock (or other way of owning) percentage of ownership, P - price of percentage of ownership. This could include ""outside of exchange"" deals. Some funds could buy ownership percentage directly via partial ownership deal. That ownership is not stock, but fixed-type which has value too. Stock market cap is speculative value, M2 = Q * D, where D is free stocks available freely, Q - price of stock, in other words Quote number (not price of ownership). Many stock types do NOT provide actual percentage of ownership, being just another type of bond with non-fixed coupon and non-fixed price. Though such stocks do not add to company's capitalization after sold to markets, it adds to market capitalization at the moment of selling via initial price." "Market cap is the current value of a company's equity and is defined as the current share price multiplied by the number of shares. Please check also ""enterprise value"" for another definition of a company`s total value (enterprise value = market cap adjusted for net nebt). Regarding the second part of your question: Issuing new shares usually does not affect market cap in a significant way because the newly issued shares often result in lower share prices and dilution of the existing share holders shares." "So, the term ""ready market"" simply means that a market exists in which there are legitimate buy/sell offers, meaning there are investors willing to own or trade in the security. A ""spot market"" means that the security/commodity is being delivered immediately, rather at some predetermined date in the future (hence the term ""futures market"").  So if you buy oil on the spot market, you'd better be prepared to take immediate delivery, where as when you buy a futures contract, the transaction doesn't happen until some later date.  The advantage for futures contract sellers is the ability to lock in the price of what they're selling as a hedge against the possibility of a price drop between now and when they can/will deliver the commodity.  In other words, a farmer can pre-sell his grain at a set price for some future delivery date so he can know what he's going to get regardless of the price of grain at the time he delivers it.  The downside to the farmer is that if grain prices rise higher than what he sold them for as futures contracts then he loses that additional money.  That's the advantage to the buyer, who expects the price to rise so he can resell what he bought from the farmer at a profit. When you trade on margin, you're basically borrowing the money to make a trade, whether you're trading long (buying) or short (selling) on a security.  It isn't uncommon for traders to pledge securities they already own as collateral for a margin account, and if they are unable to cover a margin call then those securities can be liquidated or confiscated to satisfy the debt.  There still may even be a balance due after such a liquidation if the pledged securities don't cover the margin call. Most of the time you pay a fee (or interest rate) on whatever you borrow on margin, just like taking out a bank loan, so if you're going to trade on margin, you have to include those costs in your calculations as to what you need to earn from your investment to make a profit. When I short trade, I'm selling something I don't own in the expectation I can buy it back later at a lower price and keep the difference.  For instance, if I think Apple shares are going to take a steep drop at some point soon, I can short them.  So imagine I short-sell 1000 shares of AAPL at the current price of $112.  That means my brokerage account is credited with the proceeds of the sale ($112,000), and I now owe my broker 1000 shares of AAPL stock.  If the stock drops to $100 and I ""cover my short"" (buy the shares back to repay the 1000 I borrowed) then I pay $100,000 for them and give them to my broker.  I keep the difference ($12,000) between what I sold them for and what I paid to buy them back, minus any brokerage fees and fees the broker may charge me for short-selling. In conclusion, a margin trade is using someone else's money to make a trade, whether it's to buy more or to sell short.  A short trade is selling shares I don't even own because I think I can make money in the process. I hope this helps." The economic utility of markets results from price discovery (and the corresponding capital allocation.) Information which changes the material value of a business can come to light, be processed by sentient beings capable of rational thought, and conveyed to the market in the form of a price in an hour. That can't happen in a millisecond.  And don't try to argue about liquidity, because HFT liquidity evaporates in milliseconds in adverse conditions (i.e. when liquidity matters.) Yes and no, P2P Capital Markets is similar concept but is more geared towards business loans. Community Lend used to offer this service but has stopped. HFT allows those with access to leverage sub-second propagation delays in pricing, which screws those without access to HFT systems. And since market-based capital gains are a ponzi scheme, this means that HFT essentially creates a money funnel from those without to those with.   I honestly don't see how HFT benefits the market at all - it only benefits those with HFT systems to the detriment of those without. A transaction tax that makes HFT untenable simply removes HFT systems from the equation. The markets stay liquid; stocks stay fungible.   The markets ran just fine for almost a century without HFT.