Question

Briefly explain the following functions of financial markets :

(i) Information dissemination

(ii) Mobilises savings

(iii) Provides liquidity

Answer 1

The functions of financial markets are as follows :

(i) Information dissemination : Financial markets are trading platforms that disseminate information on the trading activities between buyers and sellers.

(ii) Mobilises savings : These markets encourage people to use and invest their savings to obtain higher returns.

(iii) Provides liquidity : Financial markets provide liquidity by offering various financial instruments like equities, bonds, etc. in which investors can invest their money and obtain higher returns.