What are the functions performed by the secondary markets?
Ans. The functions of secondary market are as follows:
(a) To an issuer, the secondary market provides regular information on prices of the shares. The periodic trading of the asset reveals to the issuer the price the share commands in the market at a given point of time.
(b) It helps the issuer to judge how efficiently it is using its funds.
(c) It also helps to forecast the expected behaviuor of receptive investors.
(d) Had thee been no secondary market the investor could not sell it and in absence of liquidity he might not have invested in securities.
(e) They also provide information on fair price of the assets.
(f) They reduce search costs by making it easier for buyers and sellers of assets to contact each other.
(g) They reduce transaction costs as well.
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