ABSTRACT
Financial markets serve several purposes. They allocate capital to uses with the highest value, they provide mechanisms to ensure that this capital is used efficiently, and in fulfilling these functions they impart valuable signals for companies and governments.2 Second, they enable payments to be made cheaply and rapidly across large distances. Third, they allow individuals to change the time pattern and riskiness of their consumption. For example, mortgage banks make it possible for someone to buy a house in anticipation of future income, while insurance companies assume particular risks and thereby reduce the probability of sudden reductions in an individual’s wealth.
