16
2.1.3 Capital Market
According to Rose, Peter S. and Marquis, Milton H. 2008 capital market is designed for long term loans credit investment by business, government, and
household. The original maturity of this financial instrument is more than one year and the range loan in size from small to multimillion credits. Obamuyi,
Tomola Marshal 2013 define that efficient funds transfer between lender and borrower is the basic function of capital market. There are three basic objectives
which makes investors invest in capital market: 1. Wealth maximization
2. Liquidity maintenance 3. Risk minimization
According to Fabozi, Frank J. and Drake, Pamela Peterson 2009 there are two types of capital market securities which are equity and debt. Equity is
issued by corporations and represents shares of ownership interest. It includes common stock and preferred stocks. Common stock is a perpetual security that
has no maturity and it is represent the ownership of the corporation. Preferred stock is representing ownership interest in a corporation that has redemption date.
And the other capital market securities is debt obligation that issued by corporation and local government. It is a financial instrument whereby the
borrower promises to repay the maturity value one year after insurance. According to Rose, Pet
et er
er S
S. and Marq rqui
ui s, Milton H. 2008 capital market
is designed for long ng term loans credit investment by
b b
us u
iness, government, and household.
. T
The original matu ur
rity y
o o
f th th
is is
f f
inan an
cial instrumen n
t t
is more than one year a
and the range e
loa oa
n n
in size from small l
to mu mu
lt ltim
im illion credits
ts .
. Obamuyi,
T Tomola M
M ar
ar sh
sha al 2013
13 define that
ef ficient fu
nd nds
s transf
f er
er b
b et
et w
ween len nde
d r and
borr r
ow ow
er er
i is th
h e
e ba
si c
function of capital market. There ar e
e th
t ree ba
ba si
si c
c ob
o ject
tiv i
es wh
wh i
ic h
h ma a
k ke
s investors in ve
st in capi ta
l market: 1. Wealth maximization
2. Li qu
id it
y mainte na
nc e
3. Risk minim izatio
n Acco
rd in
g to
o F
F ab
ab oz
oz i
i, F
F ra
r nk J. and Dr
Dr ak
ak e
e, P
P am
am el
a Pe
terson 20
2009 th her
er e
e are two types of capital market se
e cu
curi i
ti ti
es which are equity and debt. Equi uity
ty i
is is
issu s ed
ed b
b y
y corporations and represents shares of ownership interest
st .
. It
It i i
nc nclu
lud des
co comm
mmon sto k
ck a nd
nd p pre
re fe
ferred sto tock
cks s
d .
. Co
Co mm
mmon sto ck
ck i
is s
a perpetua l
secu curi
rity ty that
has no no
m m
aturit it
y y
a and it is represen
ent the ow ownership of the
he c c
or o
po p
rati ti
on on. Preferred
stock is representing ownership i interest in a
a corporation that has redemption date. And the other capital market
securitie s
s is debt obligation that issued by corporation and local government
nt . It
is a financial instrument whereby the borrower promises to repay the maturit
it y value one year after insurance
17 There are some indicators that can be used to measure the performance of
capital market. These indicators such as: a The number of listed company, according to businessdictionary.com this is
the sum of company that listed on each of stock market. Company listed is firm whose share is listed quoted on an exchange market for public
trading. A company can be listed on more than one exchange market that called dual listing http:www.businessdictionary.com. The more the
number listed company it means that the more liquid that market. b Total Trading Volume, it is measure how many trades take place for
a security or on an exchange on a given trading day. A high trading volume is an indicator of a high level of interest in a security at its
current price. It is an important tool in technical analysis, trading volume is used to determine the strength of a market indicator http:financial-
dictionary.thefreedictionary.com. c Market Volatility, according to investorwords it is the unpredictable and
vigorous changes in the price within the stock market. It is necessary for some movement within the market in order to sell commodities, however a
volatile market represents the most risk to investors
http:www.investorwords.com. Investopedia defined that market volatility is a statistical measure of the
dispersion of returns for a given security or market index. Higher the volatility are the riskier the security http:www.investorwords.com.
Market volatility will measure from these two components which are Risk a The number of listed c
c om
ompany, acco rd
rd in
in g
g to businessdictionary.com this is
the sum of c c
o ompany that listed on each of stock
k ma
m rket. Company listed is
firm w
whose share is list st
ed d
qu u
ot ot
ed ed
on on
an exchange ma
m rket for public
t trading. A com
om pa
pa ny
ny can be listed on more
e t tha
ha n
n one exchange
e market that
call ll
ed ed
d d
ua u
l list st
in in
g h
tt p:ww
w. busine
ssdi dict
ct io
i nary.c
c om
om .
. The m
mor o
e the nu
nu mb
m er l
l i
iste d company it means that the more
l iq
ui d
d th t
at mar ar
ke ke
t. t.
b b
Tota ta
l Trading Vo
lu me, it is
me asure ho
w many tr
ad d
e es take
ke p
p lace fo
or a
a se
curity or on an ex
change on
a g iv
en trading day
. A
high gh
t t
ra ra
ding volume i
s an
indicator o
f a
hi gh
lev el of
in te
re st in a
se c
curity at i it
s s
current price. It is an imp
or tant too
l in tech
nical analysis, tr ad
ding vo o
l lum
me is use
d to d
et et
er er
mi mi
ne ne
t t
he h
strength of f
a a
ma ma
rk rk
et et
indic at
or ht
tp p:
: financi
ci a
al -
- r
dictionary.thefreedictionary.c .c
om om
. c
c Market Volatility, according to investorwords it is the unpr
p ed
ed ic
icta a
bl ble
e a
and vi
i gorous
h chan
an ge
ge s
s i
in the pr pr
ic ice
e wi
with th
in in
the stoc c
k k
ma ma
k rk
t et.
I It
i is nece
cess ssar
ary for so
s me mo
mo ve
vement within the he market
in in order to sell
l co
co mm
mm oditie
ie s
s, h
however a volatile market
represent ts the most
risk to investors http:www.investorword
d s.
s com.
Investopedia defined that m market
et volatility is a statistical measure of the dispersion of returns for a gi
i ven security or market index Higher the
18 of Market and Return of Market. Risk of Market shows the Risk of each
market that will take by the investor. Risk of market can either be measured by using the standard deviation or variance between returns
from that same security or market index http:www.investopedia.com. d Market Capitalization, According to investorwords, it is represents
the aggregate value of a company or stock. It is obtained by multiplying the number of shares outstanding by their current price per share. Market
capitalization is use to see the size of the market. The higher the amount of capitalization market it is means the higher the size of the market
http:www.investorwords.com
2.1.4 Random walk Theory and Efficient Market Hypothesis
Kategori