文档介绍：Stocks: Liquidity, Valuation
and Market Regulation
Federal Reserve Bank of New York
Central Banking Seminar
Preparatory Workshop in Financial Markets,
Instruments and Institutions
Asani Sarkar
October 18, 2005
Historic Importance of Securities Markets
•In many countries, development of financial markets
preceded sustained economic growth
•Example: US economic growth, 1780-1850
–Banks and securities markets reduced information asymmetry
• made borrowing cheaper and increased loan volume
–Strong emphasis on corporate governance
•frequent stockholder meetings, contested elections, firing of directors
•Share prices of ill-panies quickly dropped
–Banks and securities markets helped finance economic activity
•Stock markets were liquid; integrated nationally and internationally
•Large manufacturing firms raised capital in active IPO markets
•Banks made long-term equity investments in infrastructure firms
•Foreign purchases of US securities increased the capital stock
Stocks: Risk, Return, Liquidity and Regulation 2
Social Benefits of Equity Markets
•Well-functioning equity markets benefit society through the
positive externalities created by participating traders
–Produce informative prices (. close to fundamental asset values)
–Informative prices allow efficient production and allocation decisions
•Informative prices have to be “discovered” by the market
•Price discovery requires liquid markets
–Liquid markets have low transactions costs and high transparency
Stocks: Risk, Return, Liquidity and Regulation 3
Social Benefits of Equity Markets-2
•Liquid markets result in large gains from trade
–Traders exchange assets of lower immediate value for higher-
valued assets, making all traders better off
–Resources move to those who value them most, increasing
productivity
•Liquid markets allow hedgers to divest unwanted risk
–This reduces costs of specialization for producers
•Liquid markets facilitate