Efficient market

Efficient market

Market in which prices correctly reflect all relevant information.

Market Efficiency

The extent to which the price of an asset reflects all information available. Economists disagree on how efficient markets are. Followers of the efficient markets theory hold that the market efficiently deals with all information on a given security and reflects it in the price immediately, and that technical analysis, fundamental analysis, and/or any speculative investing based on those methods are useless. On the other hand, the primary observation of behavioral economics holds that investors (and people in general) make decisions on imprecise impressions and beliefs, rather than rational analysis, rendering markets somewhat inefficient to the extent that they are affected by people.

efficient market

A market in which security prices reflect all available information and adjust instantly to any new information. If the security markets are truly efficient, it is not possible for an investor consistently to outperform stock market averages such as the S&P 500 except by acquiring more risky securities. Significant evidence supports the premise that security markets are very efficient. Also called market efficiency. See also random-walk hypothesis, strong form, weak form.

Efficient market.

When the information that investors need to make investment decisions is widely available, thoroughly analyzed, and regularly used, the result is an efficient market.

This is the case with securities traded on the major US stock markets. That means the price of a security is a clear indication of its value at the time it is traded.

Conversely, an inefficient market is one in which there is limited information available for making rational investment decisions and limited trading volume.

References in periodicals archive ?
P has acquired the asset management businesses of ETF focused asset manager Efficient Market Advisors, the firm said.
This paper presents the results of tests on the weak form of Efficient Market Hypothesis applied to carbon efficient stock market indices of India, the United States of America (USA), Japan, and Brazil and their corresponding market indices which are used as their benchmark indices.
The efficient market hypothesis has been around since 1962, the theory based on a simple rule that states the price of any asset must fully reflect all available information.
He touches on technical and fundamental analysis, the efficient market hypothesis, behavioral theories, game theory, risk and diversification, and chaos and complexity theory.
In a chatty style offering stories and vignettes, he examines how investors can quantify risk, what options are, and what the efficient market hypothesis is really all about.
Tatsumi is on a mission, and despite the bad economy and the pullout of Nasdaq, he has built a pretty efficient market.
King calls it the efficient market hypothesis--the stock market is efficient and since goodwill doesn't affect cash flows, investors will have a tendency to ignore accounting changes and zero in on cash flow and operations.
This technology will stimulate an efficient market for these products, thereby meeting the educational and training needs of the Department of Defense with significant dual use application.
who believes AMEX will provide "a more efficient market for our stock, improve liquidity for stockholders and create greater visibility for the company.
In a series of disarmingly simple arguments George Cooper challenges the core principles of today's economic orthodoxy, explaining why financial markets do not obey the efficient market principles described in today's economic textbooks but are instead inherently unstable and habitually crisis prone.
The Exposure Draft of the Originations Data Dictionary is a giant step toward a more efficient market, benefiting borrowers, mortgage bankers and lenders, as well as other market participants.
From an economic perspective, this makes for a more efficient market (see box on page 22).

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