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Definition of Capital Markets
According to Husnan (2003) is a market for various long-term financial instruments that can be traded, both in the form of debt and equity, both issued by the government, public authorities, and private companies. According to Usman (1990: 62), generally securities which are traded in the capital market can be divided into debt securities and ownership securities. Debt securities are generally known as bonds and ownership securities known as shares. Furthermore, it can also be defined that bonds are proof of recognition of debt from the company, while shares are evidence of participation from the company.
The definition of capital markets in general is an organized financial system, including commercial banks and all intermediary institutions in the financial sector, as well as all outstanding securities. In a narrow sense, the capital market is a market (place, in the form of a building) that is prepared to trade stocks, bonds, and other types of securities using the services of securities brokers (Sunariyah, 2000: 4). Judging from the understanding of capital markets above, it is clear that the capital market is also one way for companies to find funds by selling ownership rights to the public.
Investment and Capital Market Actors
Today a model has been developed in making decisions about investment proposals that are in a portfolio, where the proposed new project is associated with other projects in a company.
Investment projects have a risk that is not independent Awat (1999: 276).
The expected profitability of a portfolio is the weighted average of the expected returns on securities compared to that portfolio. The main players involved in the capital market and supporting institutions that are directly involved in the process of transactions between the main players as follows: Kasmir (2001: 183-189):
1. Issuer.
Companies that will sell securities or make emissions on the exchange (called issuers). In issuing emissions, the issuers have various objectives and this is usually stated in the general meeting of shareholders (GMS), including:
a. Expansion of business, capital obtained from investors will be used to expand business, market expansion or production capacity
.
b. Improving the capital structure, balancing between own capital and foreign capital.
c. Hold a transfer of shareholders. Transfer from old shareholders to new shareholders.
2. Investor.
Investors who will buy or invest in companies that make emissions (called investors). Before buying securities offered, investors usually conduct certain research and analysis. This research includes company bonafide, issuer's business prospects and other analyzes.
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