What is a Capital Market Study?

A capital market study is an economic analysis of a market where governments and companies raise capital through financial activities like issuing stocks and bonds. People, companies, and governments can commission such studies for the purpose of making investment decisions as well as being more informed about economic conditions in a given country or market. Often, members of the public can access the study along with supporting materials.

Capital markets include both primary and secondary markets. On the primary markets, originators of securities like stocks and bonds sell them to investors. Usually, investment banks and other large institutional investors are the primary contributors to this market, as individuals may not have the cash to access initial issues. On the secondary market, people buy and sell securities between themselves, and the original issuer does not see any of the direct profits from the trading activity.

In a capital market study, analysts look at what is being traded on a given market and may examine the market's history and trends in trading activity. They can take note of major events on the market like big new issues or political unrest leading to falters in market value. The sheer volume of trades is considered along with how the market compares to others, particularly competing markets in the region. Analysts may also pay attention to media coverage to glean information about how members of the public are responding to economic trends.

The capital market study pulls together statistical analysis, overviews of market conditions, and assessments from analysts in a neat and usable package. When it is a commission, there may be specific requests, such as an evaluation of the market's projected performance, or a critical analysis of the kinds of companies currently active on the market. People may use the capital market study to make policy decisions as well as choices about investment activities.

Globally, capital markets raise substantial amounts of funds for entities of all sizes. They are part of a nation's regular economic activities and the health of capital markets can provide important information about a country's overall economic performance. When a capital market study shows signs of faltering investment and consumer confidence, it can reflect larger problems in need of attention. This can lead institutional investors like governments and large corporations to seek more stable sites for investment, making it more difficult for a nation to raise capital for activities like servicing infrastructure and promoting development.