Primary and Secondary Markets
As an economist for a major financial institution, I will describe the overall purpose of primary markets as creating securities. Notably, it is a market whereby companies float new bonds and stocks to the public for the first time. Further, I will offer an example of a primary market as the initial public offering (IPO). On the other hand, I will describe the purpose of a secondary market as a marketplace where stocks issued in the primary market are listed for trading. The common types of secondary markets are the stock exchanges such as NASDAQ and NYSE, where trading of stocks is undertaken (Radoias, 2019). Further, I would rely on visualization tools such as graphs to describe the mechanics of both primary and secondary markets. The mechanism will entail three avenues through which companies raise funds in the primary markets. The three include issuing securities to the general public, rights issuance through which existing shareholders are offered additional shares using a discounted price, and preferential allotment that has no association with market dynamics. On the secondary market, the mechanisms entail the exchange of stocks between investors using price markets in the stock exchanges.
The activities of primary and secondary markets influence the firm’s performance. The sensitivity of investment to price causes a significantly positive influence on a firm’s operating performance. At the same time, there is a negative influence caused by stock price informativeness on operating company performance (Andriansyah, 2017). Arguably, stock prices affect investment decisions because the more solvent a stock is, the higher the price’s informativeness and the more relevant the price is for a company’s investment decisions. Thus, the influence of primary and secondary markets on firm performance is anchored upon investment decisions. For instance, listed companies can benefit from the informational role of the secondary market’s stock prices and the primary market’s capital-raising function.
References
Andriansyah, A. (2017). The real effects of primary and secondary equity markets on firm
performance: Evidence from Indonesia. International Journal of Managerial Finance.
https://doi.org/10.1108/IJMF-01-2017-0006
Radoias, V. (2019). Price discrimination and the emergence of secondary markets. Managerial and Decision Economics, 40(4), 439-445.
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Question 
You are a new economist for a major financial institution, and you’ve been invited to speak as a guest lecturer for a Freshman Finance course at the local university.
Primary and Secondary Markets
Respond to the following in a minimum of 175 words:
Share how you would describe the overall purpose and mechanics of both primary and secondary markets.
How would you explain the way the performance of your company is influenced by the activity of the markets you described?
After your initial post, choose a classmate’s approach that is different from the approach you’d take on the guest lecture. What additional information might you include in your lecture based on your classmate’s approach?