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Information on markets

This page contains the most commonly-used business and financial terms that contain the word ‘market’. Each one also has a hyperlink to a more in-depth explanation.

The English word ‘market’ first appeared in Britain in the early 1200s. At the time it meant ‘a meeting at a fixed time for trading livestock and provisions.’ It came from the Old French word ‘marchiet’, which meant ‘marketplace, commerce, trade.’

In most Western European language, the word can be traced back to ‘mercatus’, the Latin word for ‘marketplace, buying & selling, trading.’

Bear Market / Bearish Trend – the opposite of a bull market. In a bear market, prices are moving in a downward direction.

Black Market – where goods and services are sold and purchased illegally. It does not necessarily mean the product/service is illegal, but the activity is. Also called the underground economy or underground market.

Bull Market / Bullish Trend – the opposite of a bear market. In a bull market prices are trending upward. If you feel ‘bullish’, you expect prices to rise.

Buyer’s Market – when supply is greater than demand for goods or services. Things take longer to sell in a buyer’s market, and prices tend to decline. The buyer has the upper hand. Also called a soft market.

Capital Markets – markets where equity-backed securities and long-term debt are bought and sold. Savers’ funds are directed to corporations, governments, and organizations that need medium- and long-term finance.

Captive Market – a group of consumers who have no choice but to buy a particular product. The seller has the upper hand. Examples include the sale of food and drink in movie theaters, airports and sports arenas.

Carbon Market – environmental legislation that makes businesses and nations pay for carbon emissions. Governments set a limit on how much carbon dioxide each corporation can emit. Those that emit more than their cap can buy leftover allowances from low polluters. Also called emissions trading, carbon trading, or carbon emissions trading.

Cash Market – this is a public market where commodities and/or financial products are bought, and delivered immediately, i.e. up to two working days from trade date. It contrasts with the futures market. Also called the physical market or spot market.

Commodity Market – a market where primary agricultural products, such as coffee and cereals, and raw materials (e.g. metals) are traded. It is like the equity market, but rather than trading in stocks, investors buy and sell commodities.

Domestic Market – the market within the borders of a country. For example, Toyota’s domestic market is the Japanese market, while Ford’s is the US market. Also called the internal market or home market.

Emerging Markets – countries that are emerging from being low-income economies (frontier markets), and will soon be advanced economies (industrialized nations, rich countries). Emerging economies have a rapidly-growing middle class, high literacy rates, and a young population seeking the same things as their counterparts in the rich countries.

Federal Open Market Committee – a twelve-member committee of the US central bank (Federal Reserve System). Known by its abbreviation FOMC, it sets American monetary policy, including the Fed funds target and the discount rate.

Financial Market – a market where people and entities buy and sell financial securities, commodities, foreign exchange, and other easily-tradeable items. Banks, pension funds, insurance firms, and other financial institutions form part of the financial markets.

Free Market – a market where the trading of goods and services are carried out freely by buyers and sellers, without interference from the government. Also called the open market.

International Monetary Market (IMM) – the Chicago Mercantile Exchange is divided into four divisions, one being the IMM. It trades foreign exchange, interest rate and equity index futures, and all GEM and IOM products.

Market – a place where individuals, companies and organizations come to buy and sell goods and services. It might be a physical place, such as a farmers market or flea market, or an abstract description that includes all possible consumers, as in “The automotive market is set to expand by more than 5% next year.”

Market Capitalization – the net value of all the shares a company has issued. Market capitalization, also called market cap, is calculated by multiplying the price of each share by the number outstanding. It is one of the key factors when determining stock valuation.

Market Economy – an economy where prices are set by market forces, i.e. supply and demand, instead of a central authority (government). All decisions regarding investments, production, distribution, and salaries in a market economy are determined by market forces.

Market Equilibrium – when demand for a product or service is the same as supply, the market is at equilibrium. When market equilibrium is reached, the price is stable. Also called the market clearing price.

Market Forces – refers to supply and demand, which in a free market economy are what decide the price of goods and services. When demand grows faster than supply, prices rise; when the opposite occurs, prices decline.

Market Garden – a relatively small plot of land where vegetables, fruits and flowers are grown and sold to the public (cash crops). Also called a microfarm.

Market Intelligence – the collection and analysis of data about goods, customers, competitors, etc. in a specific market. Companies use the data to determine where to allocate resources, which products to sell, and at what price.

Market Leader – a company or nation that has the most sales in a specific product in the market. It is calculated either by the number of units sold or value of sales.

Market Rate – the usual price consumers pay for a product or service. It could also refer to what the average rate is per hour for labor or a professional’s services. Also called the going rate.

Market Research – the collection and analysis of data regarding consumers, competitors, a good or services, and market trends. It is a study that looks at how a product/service is sold, what kinds of people buy it, why, and what competitors do.

Market Risk – refers to the risks investments might face due to changes in the economy or market volatility. The risk of concern is that an investment may lose value. Also called systematic risk.

Market Sector – a part of the whole market. A market sector generally refers to a broader area than an industry. For example, the health care sector includes a number of industries, such as pharmaceuticals, medical devices and biotech. In bond markets, market sector means the type of issuer (a company or the government).

Market Segmentation – a strategy that focuses on targeting various consumer bases – which attracts more potential customers, and consequently drives up sales.

Market Share – refers to how much of the market pie a company or product has, i.e. what total sales represent relative to the size of the while industry. Market share may be measured by the value of total sales, or the number of units sold.

Open Market – this is a market where all buyers and sellers compete on a level playing field. There are no unfair subsidies, taxes, tariffs and regulations that favor some players more than others. In an open market, there aren’t any regulatory barriers to entry.

Primary Market – where shares and bonds are sold for the first time. The sale of the securities goes straight to the issuer. Along with the secondary market, the primary market forms part of the capital market. Also called the new issue market.

Secondary Market – where existing stocks and bonds are bought and sold. Investors trade with other investors. Also called the aftermarket.

Secondary Mortgage Market – where the trading of mortgages (ongoing home loans) occurs. They are typically bundled together and traded as mortgage-backed securities.

Seller’s Market – a market in which demand is greater than supply. Sellers have the upper hand. Prices tend to rise when demand is strong, and goods and services are sold more rapidly.

Single Market – a market consisting of a group of countries that trade with each other without any tariffs (import taxes). Examples include the EU (European Union) and NAFTA (North American Free Trade Agreement).

Spot Market – this is a public financial market where financial instruments and commodities are bought and sold for immediate delivery (or up to three days from trade date). Also known as the cash market or physical market.

Stock Market – a place where stocks are traded. Shares (stocks) may be bought and sold as over-the-counter transactions or on stock exchanges, such as the London Stock Exchange or New York Stock Exchange.

Vertical Market – a niche market where buyers and sellers make similar goods and have virtually identical needs. The term is commonly used when talking about a sub-category of an industry. For example, a maker of stethoscopes operates in a sub-category of medical devices.