Financial markets play a critical role in allocating capital from "summary" of How Finance Works by Mihir Desai
The allocation of capital is a fundamental task in any economy. It involves deciding where to invest resources in order to generate returns. Financial markets are the mechanisms through which this process takes place. These markets provide a platform for buyers and sellers to come together and exchange capital in the form of stocks, bonds, and other financial instruments. By connecting those who have capital to invest with those who need it, financial markets play a crucial role in ensuring that funds flow to where they are most needed and can generate the highest returns. This allocation of capital is essential for economic growth and development. In a well-functi...
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