Describe efficient market hypothesis

What do you understand by the term ‘Efficient market hypothesis’?




Efficient market is one where the market price of the security is a balanced approximation of its intrinsic value.

The efficient market hypothesis is depended on following statements which are illustrated below:

- Market is free and perfect with no any trade restrictions.

- Market takes up all the information rapidly and efficiently.

- Information is costless and free and is freely accessible to all at the same time.

- Information is right and fair.

- Market players can examine the information rapidly and it is absorbed in the market throughout sells and buys signals.

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