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Equity market

The equity market is a platform where shares of public companies are bought and sold, creating a win-win scenario for issuers and investors. It operates in primary and secondary markets, with stock exchanges providing a centralized, transparent system compared to decentralized over-the-counter markets. Key participants include companies, investors, and intermediaries, with advantages like wealth creation and liquidity, but it also faces challenges like volatility and lack of guaranteed returns.

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EQUITY MARKET By:- eFinanceManagement.com https://efinancemanagement.com/sources-of-finance/equity-market
Content 1. Meaning 2. How it Works? 3. Stock Exchange or Over the Counter 4. Types 5. Participants 6. Procedures 7. Advantages 8. Disadvantages 9. Reference
Meaning • It is a market place where shares of public companies are bought and sold • It is commonplace where the issuers of the shares & subscribers of the shares come together • This market are a win-win situation for the company & the investors • It is also termed as stock market or stock exchange.
How it Works? In primary market • Lots of buyers bid for the stock according to their estimation of the market value within the price bands • After analyzing the company allocates the shares according to the timing of bid and price band In secondary market • Listing of companies share in the stock exchange • Buyers bid for that shares
Stock Exchange or Over the Counter • Stock exchange functions on a centralized system in a systematic manner whereas, Over-the-Counter (OTC) markets work on a decentralized system • In stock exchange no involvement of any third party like dealers, in the trade whereas, third-parties like brokers and dealers play a very vital role in this market • Stock exchange eliminates counterparty risk whereas, there is high counterparty risk in OTC markets • Stock exchange is more transparent and regular whereas, OTC market are less transparent and regular
Types • Primary Market • Secondary Market
Participants • Companies • Retail investors and institutional investors • Financial intermediaries • Regulatory authority
Procedures • Risk management • Information dissemination • Settlement and clearing
Advantages • Creation of wealth • Access to a cheaper source of finance • Boosts the Company’s expansion targets • Platform for making them visible to the world • Stability and attracts investors • Liquidity for investors • Limited liability • Enjoy voting rights • Free from interest rate burden
Disadvantages • Volatility is the biggest risk • Does not give a guaranteed return to the investor • Equity shareholder gets money on the basis of the residual claim • Disclosure of a lot of information to general public at large scale
Reference To know more about it, refer to the following article: Equity Market