Informational efficiency

Informational efficiency

The degree to which market prices correctly and quickly reflect information and thus the true value of an underlying asset.

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 ?
A spokesman of the FPCCI pointed out that several developing countries had introduced amnesty scheme during last three years to create informational efficiency in financial markets and growth of economy.
Lin William Cong and Douglas Xun Xu, University of Chicago, "Rise of Factor Investing: Asset Prices, Informational Efficiency, and Security Design"
Thus, a general statement concerning the informational efficiency of prices was transformed into a testing procedure for market pricing within the framework of three sets of conditions.
We also show that the improvement in liquidity is mainly driven by a reduction in adverse selection; that informational efficiency is not significantly affected; and there is an increase in retail trading.
The informational efficiency of the Romanian capital market was differently tested in the past years.
This result contradicts the belief of the SEC and others that naked shorting is not information-based and does not contribute to stock market informational efficiency.
In this study, the entropy measurement, an econophysic approach, was applied to quantify the informational efficiency of timber real estate investment trusts (REITs), wood, furniture, and paper markets in the United States during the period from 1999 to 2012.
He contributes to the sizable literature on informational efficiency in sport betting markets by analyzing a large data set betting on football matches in Europe.
Competition between NSE and BSE and the free entry and exit for the economic agents who trade on these exchanges have improved the operational as well as informational efficiency of the stock markets.
They found a strong decrease in market quality: widening spreads accompanied by a significant decrease of informational efficiency, and a dramatic increase of lending costs.
Manne argues first that insiders trading on nonpublic material information contribute to improving the informational efficiency of stock prices.
A stronger version of the time-invariance is involved, if the markets display different degrees of informational efficiency and the prices' evolution itself is close to a pure random walk process (eventually with drift).
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