Efficient markets

Topic 

Efficient markets

Instructions 

1. Describe an efficient capital market for stocks.
2. Compare and contrast the weak form of market efficiency with the strong and semi-strong forms.
3. Explain the relevance of market efficiency for financial managers.

Answer Preview 

An efficient market is a market whereby share prices are up to date, accurate, and in real-time. A sufficient capital market must incorporate all information concerning it and the full value of securities inclusive of their prices. Inefficient capital market, stocks are valued using the present value of their cash flows which are expected in the future by owning such securities. The competitiveness of the stocks is derived from the fluctuating manner of the stocks due to uncertainties. Inefficient capital market, information is easily available, less costly, and accurately concerning prices of securities.

Word Count: 200