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Pricing Efficiency

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Pricing efficiency
Also called external efficiency; a market characteristic that prices at all times fully reflect all available information that is relevant to the valuation of securities.

Pricing Efficiency
A situation in which the price of a security reflects all available information in the market. There is disagreement as to extent to which it is possible. For example, the different forms of the efficient markets theory hold that this is possible to a greater or lesser extent, with the strong form of the EMT stating that even insider information is reflected immediately in a security's price. On the other hand, technical analysis and fundamental analysis each try to predict price trends, which assumes that not all information is reflected in a security's price and, therefore, that pricing efficiency is not complete. Pricing efficiency is also known as price efficiency or external efficiency.


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