Capital market

The capital market is the central component of the financial system where long-term capital is traded. It brings together capital providers – that is, private and institutional investors such as insurance companies and funds – with capital recipients such as companies or governments. The latter use the funds to finance investments, innovations, or government budgets. Essentially, the capital market is divided into the stock market for raising equity capital and the bond market for debt capital in the form of bonds. Through this exchange, it enables an efficient allocation of savings to productive sectors of the economy. A stable capital market is therefore crucial for economic growth, as it ensures liquidity and offers investors opportunities for returns through interest or dividends.