Frictionless market

Frictionless market

Ideal trading environment that imposes no costs or restraints on transactions.

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.
References in periodicals archive ?
In a frictionless market all economic agents have the same access to information.
Henry Cao, University of North Carolina, and Hui Ou-Yang, Duke University, "Bubbles and Panics in a Frictionless Market with Heterogeneous Expectations"
In a frictionless market, the individual would be indifferent between a mortality swap and a bank deposit.
The article is organized as follows: the next section analyzes a mortality swap in a frictionless market.
In a frictionless market, the rate of return on a mortality swap is equal to the risk-free rate; i.
In a frictionless market, the assumption of no arbitrage is essentially equivalent to the existence of a stochastic discount factor [m.
It can also be derived from agent optimality: if an insatiable investor trades in a frictionless market, his optimal portfolio choice problem only has a solution in the absence of arbitrage--otherwise he will make an arbitrarily large profit and consume an arbitrarily large amount.
Solvable and frictionless markets are populated by rational agents, which are then subjected to perturbations in an effort to recover economic realism.
Schaefer, 1984, "Continuous Price Processes in Frictionless Markets Have Infinite Variation", Journal of Business, 57:353-365
These findings are driven by how bidders self-select across markets: Better-informed bidders select frictional markets while uninformed, pessimistic bidders select the safety of frictionless markets.
The Internet has opened up the possibility of frictionless markets where groups and individuals can leverage their buying and selling power across large communities of interest," said Tom Glassanos, president of the eBusiness Solutions Division at PeopleSoft.
Objective: For the past twenty years, Mathematical Finance has grown from the perfect fit between martingale methods and models of frictionless markets.