The equity market is the place where companies sell shares to investors. This is done to raise capital. The shares investors buy represent their proportionate ownership in the firm. In return, they expect to receive dividends from the firm and profit from its growth. Equity market investors are referred to as shareholders. The following are some common ways of investing in the equity market.
Institutional investors and retail investors participate in the market. These investors include banks, pension funds, and insurance companies. Mutual funds, exchange-traded funds, and hedge funds are also major participants. Corporations also trade their own shares. Other major players include robo-advisors. The New York Stock Exchange dominates the equity market in the US.
The equity market is one of the most important tools for businesses to raise capital. Debt markets, on the other hand, do not trade publicly. By investing in stocks, businesses can raise additional financial capital for expansion and growth. The liquidity of these markets is another major reason why investors prefer this form of investment. The efficient market hypothesis states that asset prices reflect all available information. This is a key factor in making stock investing a viable option for investors.
The JSE monitors the settlement of trades on the Equity Market and takes action when required. The process starts at the broker level, via the broker deal accounting system. This system facilitates the confirmation of trades, clearing and settlement, and back office accounting. The system also compiles portfolio statements for clients.