You may not be confident that you know exactly what the capital markets are, but you almost certainly participate in them. Capital markets involve two parties on either end of a financial transaction. On one side, there are investors with capital who want to earn a return on their money. On the other, there are the companies, governments, or individuals who need to raise money. The capital markets allow these two groups to come together so that both can meet their goals.
Capital markets are an essential part of many countries’ economies, making it possible for businesses to grow, for governments to provide essential services, and for individuals to invest and build their assets. The bigger and more robust a country’s capital markets are, the more investment vehicles there typically are and the larger the potential investment capital that is available to fuel growth.
At the same time, most capital markets are regulated, by the government, the markets themselves, or by both. The goal is to increase investor confidence, and, by extension, investor participation. Achieving it often depends on the perception that everyone has equal access to good information and the best prices.
Professor Samuel L. Hayes, Harvard Business School
