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RBA Glossary definition for capital market

capital market – A market for medium to long-term financial instruments. Financial instruments traded in the capital market include shares, and bonds issued by the Australian Government, State governments, corporate borrowers and financial institutions.

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Theory

31 Dec 2005 RDP 2005-12
Gianni La Cava
Download the Paper 530. KB. Under the perfect capital market assumption, the Modigliani-Miller theorem suggests that a firm's capital structure is irrelevant to its value. ... However, there are a number of reasons why capital markets are not perfect.
https://www.rba.gov.au/publications/rdp/2005/2005-12/theory.html

Introduction

31 Dec 2005 RDP 2005-12
Gianni La Cava
1984). When capital markets are imperfect, some firms may be ‘financially constrained’ in the sense that they are unable to raise enough external funds to meet their desired level of investment ... Including financial factors as short-run
https://www.rba.gov.au/publications/rdp/2005/2005-12/introduction.html

References

31 Dec 2005 RDP 2005-12
Gianni La Cava
American Economic Review. , 57(3), pp 391–414. Hubbard RG (1998), ‘Capital-market imperfections and investment’,. ... Stiglitz J and A Weiss (1981), ‘Credit rationing in markets with imperfect information’,.
https://www.rba.gov.au/publications/rdp/2005/2005-12/references.html

Appendix A: Variable Definitions, Sources and Summary Statistics

31 Dec 2005 RDP 2005-12
Gianni La Cava
Net capital stock (K). According to the perpetual inventory method (see Appendix B). ... Tobin's Q (Q). (Market value of equity book value of debt – cash) / (net capital stock at replacement cost inventories).
https://www.rba.gov.au/publications/rdp/2005/2005-12/appendix-a.html

Data

31 Dec 2005 RDP 2005-12
Gianni La Cava
It is helpful to build the user cost of capital in a number of steps. ... The user cost of capital is also affected by movements in capital goods prices.
https://www.rba.gov.au/publications/rdp/2005/2005-12/data.html

Modelling Strategy and Results

31 Dec 2005 RDP 2005-12
Gianni La Cava
The Error Correction Model (ECM) specification can be derived from this static capital demand equation. ... Letting I. i,t. denote gross investment, K. i,t. the capital stock, and δ.
https://www.rba.gov.au/publications/rdp/2005/2005-12/modelling-strategy-results.html