Title: INTERDEPENDENCE OF INTERNATIONAL CAPITAL MARKETS
Abstract: Abstract:World financial centers have an impact on the economies around the world. This particularly applies for the U.S. equity market. Transactions which are performed on the U.S. market define market trends in most of the world's financial markets, the only question that arises to what Purpose of this research is to define and quantify the relationship of the U.S. capital markets, and market equity securities selected on world stock markets. This research will explain the concept of capital markets, its divisions and legislation. The research part is based on quantifying relationship of the U.S. equity market index on the indices of the London Stock Exchange, the Tokyo Stock Exchange and the Zagreb Stock Exchange.Keywords: Capital Market, Zagreb stock exchange, stock market indices.Jel Classification: G10, G15INTRODUCTIONCapital markets are of the most important concepts of the modern economic system. Transactions executed on the global capital markets have an impact on overall economic developments around the world. Therefore it's very important to understand the mechanisms of trading on capital markets, their role and recognize their impact on the everyday life. Capital markets are a subspecies of the financial markets. Financial markets except capital market consist of money market and foreign exchange market. Basic difference between the capital markets and money markets and foreign exchange markets, is in the maturity of the traded securities. On the money markets traded securities typically mature within twelve months. Cvjeticanin states that capital markets are one part of the financial market in which long-term transactions are performed, especially for longer period than twelve months (2004, 19). Capital markets have a long range of functions, and as most essential Bernard J. Foley stated that the capital market is mechanism that allows the transfer of funds that can be invested by economic agents with surplus to those with financial shortages (1998, 6). According to that statement the operation of the capital market funds are channeled into undervalued sectors that subsequently are developing. On the capital market the supply and demand are meeting and, based on that meeting-security price is formed. In this context, the authors Vinko Belak and Zeljana Aljinovic Barac say demand is higher due to the supply, prices increase, and if the offer exceeds demand, prices fall (2008, 2). Capital markets primarily operate through the trading of securities. There are two basic types of securities traded on capital markets: equities and debt securities. Under the term equity securities there are included stocks with all corresponding subdivisions emitted by corporations, while the debt securities include bonds, securities whose issuers may be states, local authorities and companies. Investors with excess funds invest in securities with aim to earn a profit, and the issuers receive the funds needed for business operations. The development of the financial markets has led to the emergence of various ways of securing the funds necessary for the business operation and growth of the company, which is part of the same; the above-mentioned by issuing debt and equity securities. Depending on the company, strength, capability and expectations, management selects the mode of that is the most appropriate at a given time. The capital market is constantly evolving and, as stated by Richard A. Brealey, Stewart C. Myers and Alan J. Marcus every day appear new channels of financing (2007, 29). The strongest and most developed capital market is certainly American capital market. Trading volume, liquidity, and all other aspects of the U.S. capital markets makes the focus of the world economic system. Impact of the U.S. capital markets is felt throughout the world, the only question which arises is in what extent. Capital market is complex system that is usually divided into two main groups: the primary market and the secondary market. …
Publication Year: 2014
Publication Date: 2014-06-01
Language: en
Type: article
Indexed In: ['doaj']
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