market efficiency

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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.

market efficiency

References in periodicals archive ?
Objective: For the past twenty years, Mathematical Finance has grown from the perfect fit between martingale methods and models 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.
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.
Theorem 2 In a frictionless market with taxation and a flat term structure of interest rates, there is an upper bound for the annuity price for an x-year-old individual, below which a mortality swap will not admit tax arbitrage.
Theorem 3 First Reason for Tax Arbitrage: Assume a frictionless market with taxation and a flat term structure of interest rates.