The goal in this chapter is to provide a perspective on capital market history. After studying this chapter, you should understand: How to calculate the return on an investment, the historical returns on various important types of investments, the historical risks on various important types of investments, the implications of market efficiency.
This lecture introduces you to some lessons from capital market history. After completing this unit, you should be able to: Know how to calculate the return on an investment, understand the historical returns on various types of investments, understand the historical risks on various types of investments.
Chapter 1 - Functions and roles of the financial system in the global economy. The opening chapter of Money and Capital Markets presents us with an introduction to the global financial system in which the money and capital markets play central roles. It also highlights the principal institutions that shape the character and functioning of the world’s financial marketplace.
Chapter 2 - Financial assets, money, financial transactions, and financial institutions. In this chapter, You will see the most important channels through which funds flow from lenders to borrowers and back again within the global system of money and capital markets, you will discover the nature and characteristics of financial assets how they are created and destroyed by decision makers within the financial system, you will explore the critical roles played by money within the financial system and the linkages between money and inflation in the prices of goods and services.
Chapter 3 - The financial information marketplace. In this chapter you will be able to identify the most important sources of information about the money and capital markets and the financial system, discover why the efficient distribution of information within the financial system is so important and what can happen when relevant financial information is not readily available to all market participants. You will understand how any individual or institution active in the financial marketplace can keep track of the prices of financial assets and interest rates.
Chapter 4 - The future of the financial system and the money and capital markets. After completing this chapter, students will be able to explore the economic, demographic, social, and technological forces reshaping the financial system today; to learn about recent trends in the financial system and how they may affect us in the future; to understand how the problems the financial system faces today may affect its future, leading to a new financial marketplace.
Chapter 18 - Federal, state, and local governments operating in the financial markets. In this chapter, students will be able to examine the many important roles played by the government’s Treasury Department; to identify how the government raises new funds and how it spends the funds raised; to understand how the activities of the Treasury Department impact the money and capital markets and the economy.
Chapter 21 - Consumer lending and borrowing. After completing this unit, you should be able to see the vital role played by consumers in supplying loanable funds through savings to the money and capital markets; to learn about the important role consumers play as major borrowers of funds and the laws that protect their rights; to explore the characteristics of consumer lending institutions.
In chapters 17 and 18 we studied how business firms determine their mix of permanent longterm financing and how they finance “internally” by retaining earnings. We now need to find out how firms raise long-term financing “externally.” More specifically, the purpose of this chapter is to observe the ways in which bond and stock issues are initially sold in the capital market.
Chapter 2 introduces you to consumption, investment and the capital market. After completing this unit, you should be able to: Explain how a company’s managers can, in principle, make financial decisions that will be supported by all shareholders; explain how the existence of a capital market makes this result possible; identify the company’s optimal investment/dividend policy under conditions of certainty.
Chapter 8 introduces you to the capital market. The goal is for you to learn: Understand the functions of a capital market; distinguish between the roles of financial agency institutions, financial intermediaries and investing institutions; identify and explain the role of financial agency institutions, financial intermediaries and investing institutions.
Chapter 17 - Capital market efficiency. On completion of this chapter students will know how to: Understand the concept of market efficiency, distinguish between different categories of market efficiency, understand the methods used to test for market efficiency, understand the major trends in tests of market efficiency that have uncovered evidence that is "anomalous" from a market efficiency viewpoint,...
This paper documents evidence of business cycle synchronization in selected Asia Pacific countries in the 1990s. We explain business cycle synchronization by the channel of international capital flows. Using the VAR method, we find that most Asian countries experience boom-bust cycles following capital inflows, where the boom in output is mostly driven by consumption and investment. Empirical evidence shows that capital flows in the region are highly correlated, which supports the conclusion that capital market liberalization has contributed to business cycle synchronization in Asia.
The CAPM rattled investment professionals in the 1960s and its commanding importance still reverberates today." --Dow Jones Asset Management. Nearly 30 years ago, PORTFOLIO THEORY AND CAPITAL MARKETS laid the groundwork for such investment standards as modern portfolio theory, derivatives pricing and investment, and equity index funds, among others.
Chapter 23 - International transactions and currency values. In this chapter, you will explore the functions and roles performed by the international markets within the global financial system, you will see how international payments for goods and services are made and how international borrowing and lending can be tracked through a nation’s balance-of-payments accounts, you will come to understand how the values of national currencies (such as the dollar and the euro) are determined within the modern financial system.
Chapter 5 - The determinants of interest rates: Competing ideas. After studying this chapter you will be able to understand the important roles that interest rates play within the economy, to explore the most important ideas about what determines the level of interest rates and asset prices within the financial system; to identify the key forces that economists believe set market interest rates and asset prices into motion.
Chapter 6 - Measuring and calculating interest rates and financial asset prices. In this chapter you will explore the important relationships between the interest rates on bonds and other financial instruments and their market value or price; you will be introduced to the many different ways lending institutions may calculate the interest rates they charge borrowers for loans; you will be able to determine how interest rates or yields on deposits in banks, credit unions, and other depository institutions are figured.
Chapter 8 - The risk structure of interest rates: Defaults, prepayments, taxes, and other rate-determining factors. In this chapter, students will be able to see the effects of financial assets’ marketability, liquidity, default risk, call privileges, prepayment risk, convertibility and taxability upon their interest rates and prices; to understand why there are so many different interest rates within the global economy; to learn how the “structure of interest rates” is built and why it changes constantly.
Chapter 10 - Introduction to the money market and the roles played by governments and security dealers. This chapter has presented, first of all, a broad overview of one of the most important components of any financial system, the money market. The chapter then explores the roles played by governments and security dealers in keeping the money market functioning efficiently.