Securities Markets and Market Efficiency
Markets for financial securities—from long-term bonds to short-term commercial paper and from equities (common stocks) to hybrids (part bond, part stock)—make it easier to finance a firm’s day-to-day operations or expand a small cap corporation into a Fortune 500 powerhouse. Securities markets match economic entities (corporations, governments, and, occasionally, individuals) that are looking for financing with people who have cash they wish to invest.
Common stocks offer promises to a future stream of income—like the bonds we discussed earlier—and some right to influence how the corporation is managed, and by whom. Stocks are salable, fungible, and they offer limited liability. That is, people ...
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