Final answer:
The essential characteristics of financial markets include liquidity, marketability, normative governance and regulation, timely and accurate information flow, as well as minimum transaction cost and informational efficiency. All are correct.
Step-by-step explanation:
The essential characteristics of financial markets are important for understanding how these markets function effectively. Some of the key characteristics include:
Liquidity - This refers to how quickly and easily an asset can be converted into cash without significantly affecting its market price. High liquidity is crucial for investors who may need to access their funds or adjust their portfolios quickly.
Marketability - This is the ease with which a security can be sold and turned into cash. It is closely related to liquidity.
Normative governance and regulation - A well-regulated financial market is essential for maintaining investor confidence, ensuring fair trading, and protecting against fraudulent activities.
Timely and accurate information flow - Investors require up-to-date and precise information to make informed decisions, which leads to the efficient allocation of resources in the market.
Minimum transaction cost and informational efficiency - Low costs of trading and informational efficiency (where prices reflect all available information) contribute to the attractiveness and functioning of financial markets.
Financial markets act to coordinate the supply and demand in the financial capital market, where firms seek financial capital and households look for an optimal combination of rate of return, risk, and liquidity.