Why financial market is important?

Why the financial market is important

Financial markets fit for the effective allocation of resources within the market. Through established and regulated markets, financial markets present participants with some presumption that they will be treated honestly and fairly. The financial markets offer companies, and governmental entities enter to capital. They also employ many thousands of individuals who work in the financial industry.

Financial graphs and charts

A financial market is one that allows the buying and selling of a resource. An example of a generally traded resource holds company stock, foreign currency, products including gemstones, oil and precious metals, or financial devices such as swaps, options and futures. The New York Stock Exchange is a commercial market for stocks and economic means, and the Foreign Exchange Market allows brokers to alternate money.

Impacts on Businesses

Financial markets quickly affect publicly traded business. A steep drop in the DOW due to a sizeable blue-chip stock posting a loss often shaves some points off another company’s stock, even if its actions are entirely separate. When a company’s stock price dips, its capacity to raise capital is reduced.

Effects on the Economy

Financial markets change public perception and shape the economic landscape. A strong rally on Wall Street instils confidence in businesses to grow operations and take risks. In these cases, companies hire more workers, increase the employment rate and in turn, give customers more disposable earnings. Market crashes signal the opposite: Companies grow concerned over how to fund their services, layoffs rise, and consumers don’t spend as many disposable incomes.

Regulation

The United States set the Securities and Exchange Commission in 1934 to ensure companies are transparent with their financial data and specific features of their business processes. Oversight comes in the form of regularly and yearly earnings news, routine audits and the imposition of fines for rule-breakers.

Regulation, however, is sometimes inadequate in stopping a financial market crash.


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