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Frictionless Market Assumptions

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Research Title
Question 1
1.
a.There are six assumptions of a perfect capital market, F.I.I.N.N.N. They are frictionless markets, infinitely-divisible capital assets, information efficiency, no one individual can influence the market, no collusion and no arbitrage opportunities.
b.Frictionless markets is the main assumptions broken in the real word that matter to the individual stock investor. Frictionless markets means a ideal trading environment. There are no commissions for buying or selling securities if the markets are perfect. There is a bid-ask spread. If the markets are efficient, then there would not be a bid-ask spread. The transaction costs and bid-ask spread are non-existent in frictionless …show more content…

①First, share broker can allow people to invest in shares means share brokers can help investors to analyze share markets. They can popularize the relevant knowledge of share market to people and make investors easy to understand share market. Then they can encourage them to invest in shares. ②Second, share broker usually acts as a middleman between seller and buyer. They need to show the risk and benefits of the shares to their investors. And help investors to buy or sell securities. ③Third, share brokers are conducive to improve the overall level of the securities market and share market. Increasing the liquidizing of shares is good for the healthy development of securities market and share market. ④Fourth, shares can help companies to raise companies’ money because share broker is acting as an intermediary between buyer and the seller of share. The ordinary roles that shares played in society is to help companies to raise money. The companies can through issue shares to collect idle funds from society. They can raise their capital. The investors can increase their stock dividend and their capital in these companies as well. Marshall Brain and Dave Roos wrote, “By selling stock, the company gets money with fewer strings attached. …show more content…

1)Object of bank: to max profits subject to a certain level of risk.
Object of customers: to max their wealth sit a certain level of risk.
2)The broker will want to mix fees while the client wants the min fees. However if share broker increase the brokerage fees, the amount of clients will be decrease because some clients won’t pay the high fees. And then decrease the profits too. If client can good research, it’s good for their stock selection. So client will pay the fees to share broker and they will get more profits. When share broker increase their research tools and improve their professional skill, they will have higher coses to hire more employees. So that they will attract more investors.

Word count: 1308
Reference
Buffington, J(2015) Frictionless Markets? ----The 21st Century Supply Chain

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