Which market type features a physical location where prices are established based on investor demand?

The correct answer is the auction market, which is characterized by having a physical location where buyers and sellers gather to trade securities. In this environment, prices are determined through a competitive bidding process, where investor demand plays a crucial role. The auction market allows participants to make offers and bids in real-time, leading to price discovery based on the interactions of those willing to buy and sell.

For instance, in an auction market, like the New York Stock Exchange (NYSE), traders can see the orders that are being placed and adjust their bids accordingly. This creates a dynamic setting where the prices of securities fluctuate based on immediate supply and demand conditions.

The other options, while related to financial markets, do not encapsulate this physical, direct interaction between investors determining prices in real time. The over-the-counter market lacks a centralized physical location, trading is done electronically, and prices are set through negotiation. The capital market refers to the broader category of markets where long-term securities are traded, and it doesn't specifically denote a physical market or price setting mechanism. Similarly, the equity market is concerned with the buying and selling of stocks but does not inherently imply a physical location for price establishment. Thus, the auction market stands out as the correct answer.