Answered: Which is false about Market efficiency?…

Financial Management: Theory & Practice

16th Edition

ISBN:9781337909730

Author:Brigham

Publisher:Brigham

Chapter1: An Overview Of Financial Management And The Financial Environment

Section: Chapter Questions

Problem 4MC

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Question

Which is false about Market efficiency?

Advancement in trading technology pave way to increase efficiency of financial markets.

The only information that must be available to the public for a market to be considered well-functioning is the trading prices only.

National Co. is a large conglomerate corporation that maintains good communication with investors and analyst. The company can be considered to fall on the highly efficient part of the efficiency continuum.

To have a well-functioning market, market opportunity should be communicated to the everyone, hence, to the public.

Definition Definition Degree to which financial markets incorporate all available information into the prices of assets. In a more efficient market, the prices reflect the available information more than that in a weak efficient market. It is difficult for investors to outperform the market in a strong efficient market. This is because all the available information is already discounted in the asset's price. However, in a weak-form efficiency, the market does not reflect all information in the asset's price. As a result, it becomes easier to generate better returns in a weak form or an inefficient market.

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