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The efficient-market hypothesis (EMH) [a] is a hypothesis in financial economics that states that asset prices reflect all available information. A direct implication is that it is impossible to "beat the market" consistently on a risk-adjusted basis since market prices should only react to new information.
Financial market efficiency is an important topic in the world of finance. While most financiers believe the markets are neither efficient in the absolute sense, nor extremely inefficient, many disagree where on the efficiency line the world's markets fall.
A market can be said to have allocative efficiency if the price of a product that the market is supplying is equal to the marginal value consumers place on it, and equals marginal cost. In other words, when every good or service is produced up to the point where one more unit provides a marginal benefit to consumers less than the marginal cost ...
Late last month, Robert Shiller stopped by Motley Fool Headquarters for an hour-long interview about housing, stocks, bubbles, and more. A Yale professor who just published his 10th book, Finance ...
In the short-run, perfectly competitive markets are not necessarily productively efficient, as output will not always occur where marginal cost is equal to average cost (MC = AC). However, in the long-run, productive efficiency occurs as new firms enter the industry. Competition reduces price and cost to the minimum of the long run average costs.
Used cars market: due to presence of fundamental asymmetrical information between seller and buyer the market equilibrium is not efficient—in the language of economists it is a market failure Around the 1970s the study of market failures came into focus with the study of information asymmetry .
efficient market hypothesis (EMH) Also called efficient market theory (EMT). A hypothesis that states that asset prices reflect all available information. A direct implication is that it is impossible to "beat the market" consistently on a risk-adjusted basis since market prices should only react to new information. elastic demand
In an article in the May 1970 issue of the Journal of Finance, entitled "Efficient Capital Markets: A Review of Theory and Empirical Work", [14] Fama proposed two concepts that have been used on efficient markets ever since. First, Fama proposed three types of efficiency: (i) strong-form; (ii) semi-strong form; and (iii) weak efficiency.