Differences between Capital Market and Money Market
Here are some key differences between the Capital Market and Money Market:
1. **Nature of Instruments:**
- **Capital Market:** Deals with long-term securities like stocks and bonds.
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- **Money Market:** Involves short-term instruments such as Treasury bills and commercial paper.
2. **Risk and Return:**
- **Capital Market:** Generally involves higher risk and potentially higher returns due to the long-term nature of investments.
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- **Money Market:** Typically lower risk, but with lower returns compared to the capital market.
3. **Maturity Period:**
- **Capital Market:** Has a longer maturity period, often extending beyond one year.
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- **Money Market:** Involves short-term lending and borrowing, usually with a maturity period of one year or less.
4. **Participants:**
- **Capital Market:** Investors in capital markets include individuals, institutional investors, and companies looking for long-term financing.
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- **Money Market:** Participants are usually financial institutions, governments, and large corporations seeking short-term funds.
5. **Instruments Traded:**
- **Capital Market:** Stocks, bonds, and other long-term securities are traded.
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- **Money Market:** Instruments include Treasury bills, commercial paper, certificates of deposit, and short-term loans.
6. **Purpose:**
- **Capital Market:** Facilitates long-term capital investment for growth and development.
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- **Money Market:** Meets short-term liquidity needs and helps in the management of short-term funds.
7. **Regulation:**
- **Capital Market:** Subject to strict regulatory frameworks to ensure transparency and investor protection.
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- **Money Market:** Also regulated, but the regulations may differ from those governing the capital market.
8. **Examples of Institutions:**
- **Capital Market:** Stock exchanges, investment banks, and venture capital firms.
- **Money Market:** Central banks, commercial banks, and money market mutual fund.
