--%>
Assignment Help - homework help

Capital markets efficiency

What is capital markets efficiency?

E

Expert

Verified

In an efficient capital market, security prices adjust rapidly to the infusion of new information and therefore, the current security prices reflect all available information. There are a set of assumptions which make us familiar with the efficient capital market which are as follows:

a) A large number of profit maximising participants analyse and value securities, each independently of each other.

b) New information regarding securities comes to the market in a random fashion and the timing of one announcement is generally independent of each other.

c) Profit maximising investors adjust security prices rapidly to reflect the effect of new information.

In an efficient market, the expected returns implicit in the current price of the security should reflect its risk which means that investors who buy at these informationally efficient prices should receive a rate of return that is consistent with the perceived risk of stock.

   Related Questions in Microeconomics

  • Q : Cartel Select the right answer of the

    Select the right answer of the question. We would expect a cartel to achieve: A) both allocative efficiency and productive efficiency. B) allocative efficiency, but not productive efficiency. C) productive efficiency, but not allocative efficiency. D) neither allocati

    		•
  • Q : Problem on Complementary Goods From the

    From the viewpoints of auto makers, the weakening of OPEC oil cartel in the year 1990s resulted in a/an: (1) Rise in demand for cars. (2) Reduction in demand for cars. (3) Rise in the supply of cars. (4) Reduction in supply of cars.

    Q : Quantity demanded to exceed quantity

    I have a problem in economics on Quantity demanded to exceed quantity supplied. Please help me in the following question. A shortage takes place whenever the current market price causes: (1) Quantity demanded to surpass quantity supplied. (2) Quantity

    		•
  • Q : Asymmetric Information problem The

    The one-year old car tends to sell for much less than the brand latest car. A part of the reason is that: (i) Sellers and buyers have similar information regarding used cars as they do latest cars. (ii) Buyers and sellers both encompass more information regarding new

    		•
  • Q : Income of Development and Distribution

    The extent of equality within the income distribution of a country seems to depend most heavily upon the degree of: (w) economic development in the country. (x) progress towards national socialism. (y) central economic planning. (z) fertility of the a

    		•
  • Q : Example of price elasticity of demand

    At P = $100, there 50 tons of Garden-Rich fertilizer are demanded within Patagonia; at P = $80, there quantity demanded is 70 tons. Therefore price elasticity of demand for fertilizer: (w) 5/8. (x) 3/2. (y) 4/5. (z) 2/3.

  • Q : Arbitrage and Transaction Costs The

    The individual or organization which simultaneously purchases low and sells high in various markets is a/an: (i) Elevator. (ii) Speculator. (iii) Analyst. (iv) Arbitrageur. (v) Operator. Can someone please help me in finding out th

    		•
  • Q : Problem on demand for Inferior Goods I

    I have a problem in economics on demand for Inferior Goods. Please help me in the following question. When income rises, demands for: (1) Substitute goods reduce. (2) Inferior goods reduction. (3) Normal goods reduction. (4) Complementary goods rise.<

    		•
  • Q : Scope of Economies I have a problem in

    I have a problem in economics on Scope of Economies. Please help me in the following question. Whenever the production of one good (example: milk) decreases the production costs of complementary products (that is, butter and cheese), a firm is capable

    		•
  • Q : Total value of the corporation stock I

    I have a problem in economics on Total value of the corporation’s stock. Please help me in the following question. Targeting for the hostile takeover is general whenever a firm has assets which are worth: (1) More than the net value of corporati

    		•