Capital Market
A financial market where long-term debt and equity securities are issued and traded.
What is Capital Market?
Capital markets are financial markets in which participants raise and invest capital by buying and selling long-term financial instruments — primarily stocks and bonds with maturities greater than one year. They consist of a primary market, where companies and governments issue new securities directly to investors to raise capital, and a secondary market, where investors trade previously issued securities among themselves. Capital markets are distinct from money markets, which deal in short-term instruments (under one year). Well-functioning capital markets are essential for economic growth, enabling businesses to fund expansion and investors to earn returns.
Example
When a company like Airbnb conducted its IPO in December 2020, it used the primary capital market to issue shares to the public and raise approximately $3.5 billion. After the IPO, Airbnb's shares began trading on the Nasdaq secondary market, where investors buy and sell those shares daily without the company receiving additional proceeds.