Introduction
One of the primary responsibilities of financial managers is to raise capital in terms of funds, because only a few firms can fund all their projects solely with their internal sources (Gallagher and Andrew 21). Sourcing of funds operates via financial markets which involve trading of securities. For this reason, knowledge of different markets and investment principles is essential for the business community.
Financial systems accept units of economic surplus to do business with different deficit economic units in a form of financial markets. Understanding changes in the financial market is necessary for the successful prediction and speculation of the economy (Besley and Brigham 700). For any development of commerce and industry of the country, there must be a strong understanding of different markets and how they operate (Sundaresan 3-8).
The main purpose of the study is to explore the working of the financial market. The research will explain how both primary and secondary markets operate and what products are available in both categories of financial market. One of the major principles of investment is to understand the financial market (Burton, Nesiba and Brown 46).
Hypothesis
A Primary market is where newly created securities trade in the financial marketplace. It involves the sale of new securities and shares to surplus economic and financial institutions by deficit economic units. On the contrary, secondary market is where traders or investors sell previously traded securities among themselves.
Issuing of new stocks and selling of the already existing stocks by the firm occur simultaneously. However, this does not invalidate the advantages of high-quality secondary market.
Methodology
The researcher will conduct an in-depth study of other researchers’ works. Relevant data will be collected using various observations, questionnaires and interviews will be carried out among different market participants to explore the financial market fully. Collected data will be processed using different financial data analysis procedures that include tables and graphs and later are discussed in the report.
Studying financial market involves various financial ratios involving evaluation of different market and corporate performances. Methods that involve examining time-series variations, comparison of financial data and common stock characteristics will, therefore, fulfill the research hypothesis (Bell, Brooks and Prokopczuk 428).
The research will include regression- discontinuity design to investigate variation in the financial market through evaluation of both primary and secondary markets. Investors need to know investment procedures for successful and profitable returns in their business.
Limitations and Delimitations of the Study
Limitations
Since the research involves personal interviews, some respondents may reply to interview questions in accordance with their mood. It hinders the truth and also puts under the question the reliability of collected data.
Delimitations
The study will involve exploring primary and secondary markets in financial investing.
Significance of the Study
Understanding financial market futures is essential in reducing risk associated with future price changes. Today, financial markets experience growth characterized by volatile prices to enable lenders and borrowers to deal with the risk of future economic fluctuations.
Literature Review
A vibrant secondary market will hold the funding of arranged deficits in the primary market in check. It will lead to an adverse impact on the industry and economic growth of a country (Redhead 118). Scholars have found out that the availability and the strength of the primary market are as a result of a vibrant secondary market (Brakman 282). However, the secondary market is not responsible for any addition of funds in the economy, but its use is evident to have a positive impact on the primary market.
Discussion
The role of the right investment is critical in developing the economy of any given country (Kapil 15). Through capital investment, funds flow from investors to net borrowers there by sustaining capital of the country.
Works Cited
Bell, Adrian R, Chris Brooks and Marcel Prokopczuk; “Predicting financial distress of a company.” Handbook of Research Methods and Applications in Empirical Finance; Cheltenham: Edward Elgar 17.1 (2003): 428-430. Print.
Besley, Scott and Eugene F. Brigham. Principles of Finance, 5th ed. Thomson South-Western, 2005. Print.
Brakman, Steven. Nations and Firms in the Global Economy: An Introduction to International Economics and Business. Cambridge: Cambridge, 2006. Print.
Burton, Maureen, Reynold F. Nesiba and Bruce Brown. Financial markets, instruments and market makers: An Introduction to Financial Markets and Institutions. Armonk: M.E. Sharpe, 2010. Print.
Gallagher, Timothy J, and Joseph D. Andrew.Financial Management: Principles and Practice. 4th ed. Upper Saddle River: Prentice Hall,1997. Print.
Kapil, Sheeba. Financial Management. Noida: Pearson, 2011. Print.
Redhead, Keith. Personal Finance and Investments: A Behavioural Finance Perspective. London: Routledge, 2008. Print.
Sundaresan, Suresh M. Fixed Income Markets and Their Derivatives. 3rd ed. Cincinnati: South-Western College Pub, 1997. Print.
