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 ?
The efficient market hypothesis is the idea has priced everything in, meaning there's no point in picking stocks, Mintzmyer said.
A standard "efficient market" analysis does not help us answer that question, because in perfect markets, such flows would be self-correcting.
One of the most important concepts in financial economics is the Efficient Market Hypothesis (see the video: What is The Efficient Market Hypothesis - EMH).
Experts from iShares discuss four trends that will fuel future ETF growth and how these might transform insurance general account portfolios: ETF investors are active investors; investors are cost-sensitive; bond trading evolution favors ETFs for efficient market access; and the business model for financial advice is transforming.
"Joining OTCQX Banks will enable FineMark Holdings, which has over $1.7BN in assets, over $3.5BN in assets under management and administration and locations across three states, to provide its investors with transparency and an efficient market to research and trade its shares.
'All of these changes are expected to play a major role in transforming the Southeast Asian energy market into a vibrant, eco-friendly, secure and efficient market in the next five years,' said Gaurav Modi, chief executive of Capgemini in Southeast Asia, Hong Kong and Taiwan and Kiran Keshav, group sales officer.
'OTCQX provides innovative community banks with an efficient market to build visibility and long-term shareholder value.
And if the claim is false, Bitcoin's value is obviously another deadly strike against the efficient market hypothesis.
The author covers the post-crisis regulatory landscape, regulatory issues in the aftermath of the crisis, financial regulation as a response to fraud and corruption, the war on regulation, the efficient market hypothesis and its inherent issues, the regulation of remuneration in the financial sector, and a wide variety of other related subjects.
In Finance 101, we learn of the efficient market hypothesis and its assertion that asset prices fully reflect all known information, and its corollary, that trying to beat the market is futile.
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.

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