Perfect market assumptions

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Perfect market assumptions

Conditions under which the law of one price holds. The assumptions include frictionless markets, rational investors, and equal access to market prices and information.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

Perfect Market Assumptions

The assumptions under which a market or an economy is entirely efficient. Perfect market assumptions include equal access to information by all market participants, completely rational economic actors, and no transaction costs (such as taxes). Perfect market assumptions rarely, if ever, hold true in the real world.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved
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(19) Perfect Market Assumptions, FARLEX FREE FINANCIAL DICTIONARY
REGULATING COMPLACENCY: HUMAN LIMITATIONS AND LEGAL EFFICACY
Given the role of liquidity in the performance of portfolio insurance in the crash of 1987 and in the collapse of LTCM, it has perhaps revealed itself as the Achilles' heel of finance built on perfect market assumptions. At the same time, however, we already know that liquidity can be studied.
Merton Miller and Modern Finance
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