BUS4070_u05a1

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Capella University *

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4070

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Economics

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Jan 9, 2024

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1

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Valdez Nafanua Valdez BUS4070- Foundation in Finance U05a1 May 11, 2022 Explain the following terms: equilibrium, marginal investor, and efficient markets hypoth- esis (EMH). Distinguish among the three levels of market efficiency. Briefly explain the im- plications of the EMH on financial decisions. Equilibrium occurs when supply and demand are equal. Marginal investors are those who operate on behalf of their clients. An efficient market theory informs investors that stocks and bonds are valued at the best prices. There are three efficiency levels. The weak form is information about previous stock prices that cannot be utilized to predict stock prices in the future. Then there's a semi-strong form that says firm insiders can't earn high returns. When considering the market and its previous performance, financial judgments can be taken. With EMH, the market can move towards equilibrium. In long-term equities and bonds, EMH would be most effective.
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