Perfect capital market

Perfect capital market

A market in which there are never any arbitrage opportunities.

Perfect Capital Market

Any market in which assets are priced with total efficiency. In a perfect capital market, there are no possibilities for arbitrage. See also: Efficient markets hypothesis, Perfect competition.
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may be responsible for data not conforming to the model's prediction, hence finding the neoclassical model, with the perfect capital market, to have been misspecified.
The first is to test for the perfect capital market.
Proof: Assume that preferences are homothetic, real prices, constant income [= m], a perfect capital market, and that firms face menu costs large enough so they cannot increase their current profit by changing price.
In a perfect capital market, acting through the market allows non-innovating agents to diversify their risks.
With the interest rate determined not by the perfect capital market but by personal negotiation with agent 1, agent i will have the incentive to misrepresent the true effectiveness of his innovation (namely, to reveal only a marginal part of his true returns) in order to negotiate an interest rate that is as low as possible.
Under the theory of perfect capital markets, a firm should distribute all earnings it does not need in the immediate future and simply issue more equity to finance new initiatives.
The assumption of perfect capital markets ensures that firms have access to an unlimited supply of funds at a constant cost of capital.
MM posited in a 1958 paper that, assuming perfect capital markets and tax neutrality, a firm's mix of debt and equity doesn't affect its value.
It is well known that, without progressivity, privatizing Social Security (that is, moving to a defined-contribution system) and prefunding Social Security's existing defined-benefit structure should lead to an identical reduction in unfunded liabilities within a deterministic economy with perfect capital markets.
The empirical shortcomings of existing models, developed mainly under the assumption of perfect capital markets, and the theoretical advances in the field of information economics have stimulated an explosion of studies that focus on the effects of financial constraints on investment.
The authors' analysis, one they mapped out quite succinctly in a 1989 Columbia Law Review article, "The Corporate Contract," focuses on two means of regulating corporate control: the elaboration of rules that perfect capital markets and of rules that curb managerial power.
With perfect capital markets there is a single world interest rate with a constant value, [Mathematical Expression Omitted].