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Unformatted text preview: Chapter 5: Securities Markets • 5.1: Participants in Securities Markets o I ndividual owners – some securities owned by individual people (about 28% of U.S. citizens directly hold stocks, 25% of mutual funds) o Securities firms – companies whose primary purpose is to hold securities, trade them or help others trade them. Includes (1) mutual funds, (2) hedge funds, (3) brokers and dealers, and (4) investment banks Mutual fund – a financial institution that holds a diversified set of securities and sells shares to savers. Hedge fund – a variant of a mutual fund that raises money from wealthy people and institutions and is largely unregulated, allowing it to make risky bets on asset prices. – Leverage – borrowing money to purchase assets Brokers and Dealers – Broker – a firm that buys and sells securities for others – Dealer – a firm that buys and sells securities for itself, making a market in the securities Investment bank – a financial institution that serves as an underwriter and advises companies on mergers and acquisitions. – Underw riter – a financial institution that helps companies issue new securities o Other financial institutions Pensions funds Insurance companies Commercial banks o Financial industry consolidation Repeal of the Glass Steagall act in 1999 2007-2009 financial crisis • 5.1: Stocks and Bond Markets o Primary markets – financial markets in which firms and governments issue new securities...
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- Summer '08
- fi rm