投资分析与组合管理-im04.docVIP

CHAPTER 4 ORGANIZATION AND FUNCTIONING OF SECURITIES MARKETS What is a Market? A market is a means through which buyers and sellers are brought together to aid in the transfer of goods and/or services. Characteristics of a Good Market Timely and accurate information on price and volume of past transactions Liquidity (ability to buy or sell quickly at a price close to prior price) Price continuity – prices do not change much from one transaction to another unless significant new information becomes available Depth – several potential buyers and sellers must be willing to trade at prices above and below the current market price Low transaction costs (internal efficiency) Rapid adjustment of price to new information (external efficiency or informational efficiency) Organization of the Securities Markets Primary markets are those where new securities are sold and funds go to issuing unit Secondary markets are those where outstanding securities are bought and sold by investors. The issuing unit does not receive any funds in a secondary market transaction Primary Capital Markets Government Bond Issues Treasury Bills – negotiable, non-interest bearing securities with original maturities of one year or less Treasury Notes – original maturities of 2 to 10 years Treasury Bonds – original maturities of more than 10 years Municipal Bond Issues Method of sale Competitive bid – usually involves sealed bids Negotiated sale – involves contractual arrangements between underwriters and issuers Private placement – involves sale of securities directly to a small group of investors or institutional investors Underwriting function – the investment banker purchases the entire issue from the issuer and resells the security to the investing public. The firm charges a commission for providing this service. For municipal bonds, the underwriting function is performed by both investment banking firms and commercial banks Origination – involves the design of the bond issue and initial planni