Capital Markets are composed of primary and secondary markets. The most common capital markets are the stock market and the bond market. Capital markets seek to improve transnational efficiencies. These markets bring those who hold capital and those seeking capital together and provide a place where entities can exchange securities.

Corporate Finance
In this realm, the capital market is where investable capital for non-financial companies is available. Investable capital includes the external funds included in a weighted average cost of capital calculation—common and preferred equity, public bonds, and private debt—that are also used in a return on invested capital calculation. Capital markets in corporate finance may also refer to equity funding, excluding debt.

Financial Services
Financial companies involved in private rather than public markets are part of the capital market. They include investment banks, private equity, and venture capital firms in contrast to broker-dealers and public exchanges.

Public Markets
Operated by a regulated exchange, capital markets can refer to equity markets in contrast to debt, bond, fixed income, money, derivatives, and commodities markets. Mirroring the corporate finance context, capital markets can also mean equity as well as debt, bond, or fixed income markets.

KEY TAKEAWAYS

• Capital markets refer to the places where savings and investments are moved between suppliers of capital and those who are in need of capital.
• Capital markets consist of the primary market, where new securities are issued and sold, and the secondary market, where already-issued securities are traded between investors.
• The most common capital markets are the stock market and the bond market.