MACASINAG, BRYAN IVANN S.

BSMA-4B

FM 321- 13840 9/23/2021

“Financial Markets and Institutions”

This chapter provides discussion about how capital is allocated in every firm. There are
several ways on how capital is allocated as tackled in this chapter. The chapter explain three
efficient ways of capital flow which includes direct transfer, underwrite, and financial
intermediary.

Chapter two also tackles about financial markets, instruments, and institutions used in the
allocation process. There are five financial markets stated in the book and ten financial
institutions. Basically this markets and institutions help firms in their capital allocation process.
Furthermore, the book provided information about physical location exchanges and electronic
markets for common stocks, stock market reporting, and stock indexes. These markets basically
are important for firms since this is where traders meet to buy and sell securities. However,
there is a rampant increase in the use of exchanges over computers.

The latter part of chapter tackled about stock market efficiency. So basically, chapter two
wants the readers to have knowledge about the financial environment of business and also
individuals. The chapter also pointed out the volatility of securities which is important in
realizing decision making. The chapter wants us to remind that financial markets are work in
progress and much more work remains to be done. Hence, in the future we expect that
financial market somehow change.
CONCEPT MAP

>Direct transfers
THE CAPITAL ALLOCATION PROCESS >Underwrites
F >Financial Intermediary

I *Physical & financial Asset *Primary and

N FINANCIAL MARKETS *Spot & Future Markets Secondary
*Money & Capital Markets *Private and Public
A
N *Investment Banks *Credit Union*Mutual Funds
C FINANCIAL INSTITUTIONS *Commercial Banks*Pension Funds*ETF*PEC
*Financial Services*Life insurance*Hedge Funds
I
A
*Physical Location
L THE STOCK MARKET
*OTC & Nasdaq Stock Markets

MARKET *STOCK
S THE MARKET FOR COMMON STOCK MARKET
TRANSACTIONS
AND

INSTITUTIO *STOCK MARKET REPORTING

NS STOCK MARKET and RETURNS *STOCK MARKET RETURNS

*CONCLUSION ABOUT MARKET

STOCK MARKET EFFICIENCY EFFICIENCY
 Financial Market

Primary Market Secondary Market

Corporation Investors Investors

Banks

Banks