KIC000033 - Market Efficiency The Efficient Market...

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The Efficient Market Hypothesis Why worry about efficiency? Prices are S\~o1<; which determine resource allocation in a ket economy Efficient prices are high-quality signals For allocations to be "optimal" the prices should be efficient Also, to encourage many small investors to become market participants, prices should be perceived as "fair" Competition and Efficiency Some information is publicly announced and easy to get Once information becomes available, market participants OOOJv'1.t. it and trw on it Prices'move in response to the trading Some market participants engage in expensive and time- consuming research activities to gather (new?) information As they trade on this information, ¥'~'S. move ThuS, competition among researchers and traders assures that prices will reflect available information Market Efficiency Fundamental values shoul - Apect~ Ul~at::U:IU£:L_ and - .u'SC~ rates How are these determined? -
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KIC000033 - Market Efficiency The Efficient Market...

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