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The importance of the Roles Played by the Stock Market - Assignment Example

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The importance of the Roles Played by the Stock Market

The stock market has so many roles that it plays and the various roles are of utmost importance as a primary market and as a secondary market in the development of the economy. There are quite a number of the most stable, mature, and well performing stock markets around the world, for instance, London, Hong Kong and New York(Van Antwerp,W,1975)  The roles that the stock markets perform are very central to the development of any economy. By virtue of the primary markets being involved with new securities, this is where an investor interested in initial public offerings of any public company and also government bonds can easily go find them. In such a market, securities are sold to investors directly from the selling company itself. This makes trading at the stock market faster and easier. In the London stock exchange for instance ,one of the most common traded securities are the municipal bonds, this basically entails the direct purchasing of debenture from the concerned authorities, for instance, the municipality. The London stock exchange put a lot of premium on these primary markets because to them, these markets are very important not just in strengthening the economy but also in as far as capital markets are concerned. The recent world financial crisis had, indeed, a great negative impact to the performance of the stock markets world over. The stock exchanges, for instance, does provide facilities related to issuance or redemption of securities and many other like capital events, income payment and dividends. Securities that are traded on any given stock exchange may include shares that are provided by the unit trusts, companies, derivatives as well as investment products such as bonds(Giddy,1994) Stock exchange is, in most cases considered to be the most necessary component of any stock market. The stock market’s demand and supply is normally driven by so many factors which, in virtually all the fee markets, affect stocks’ price. In any country the financial system tends to fund other areas from the haves and their surplus funds to the ones with a shortage in funds, by direct market financing or indirect bank finance. A country’s financial system and markets matters a lot in as far as the economic growth is concerned. The stock market plays a very big role in ensuring that the economy grows steadily. As much as some economists do not believe in the argument that the finance-growth kind of relationship between how well or bad the stock market is doing to the economic development.The economic development that is seen in any place always creates demands for certain types of financial arrangements, and financial system always tend to automatically respond to such demands. The stock market has natural mechanisms that help in addressing the issue of ensuring that a nation or a city has achieved what is considered to be the optimal financial system outlook. Overall, the stock market stabilizes the financial system, together with other well-developed systems for instance a good legal system, and this is normally done by incorporating elements or aspects of direct market based finance and indirect banking based finance. A stable and well developed stock market ensures that that there is a stable and strong financial system in place ...Show more

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Name Instructor Course Date The importance of the roles played by the stock market To enable investors to trade securities, they must be able to access the assets. The primary and secondary securities markets do exist to enable investors have the access and also enable the sale and purchase of securities…
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