Describe Market efficiency
Market efficiency is the extent to which the price of a stock reflects all the available and relevant information with regards to the stock. If the market is efficient then all the information is already captured in the share price which means that all shares are priced at their true value or very close to the true value. There will not be any undervalued or overvalued shares. On the other hand, if markets cannot capture all the available information about a stock then there is an opportunity to make profits since not all share prices will not reflect their intrinsic value.
Market efficiency has three basic forms: 1). weak form - in which prices reflect the market data including past prices and trading volumes. 2). semi-strong form - prices reflect all public information available about the stock 3). strong form - prices fully capture all information about a stock, including public and private information.
Q1. While defining the concept of market efficiency, briefly describe the theoretical basis of measuring efficiency under a perfectly competitive market. Q2. What are the assumptions made in answering Q1? What happens if those assumptions are not valid?
1. Market efficiency (5 marks) a. Identify and describe the three forms of market efficiency. Do not use more than five sentences for each form of market efficiency. Make sure your descriptions discuss information dispersion and identification of mispriced securities. (4 marks) b. Based on your knowledge and understanding of the three forms of market efficiency, which form do you think most appropriately describes the Toronto Stock Exchange? Explain your answer.
1.While defining the concept of market efficiency, briefly describe the theoretical basis of measuring efficiency under a perfectly competitive market. 2.If the real wage rate (adjusted for inflation) declines for the jobs for high school graduates, would the true opportunity cost of attending college or spending for higher education decline? Give an example. Answer both questions carefully and I will give you a thumps up
Describe the weak form efficiency ,semi-strong efficiency and the strong form efficiancy information for AT&T ( NYSE) in the stock market
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Summarize how market equilibrium in perfect competition results in productive efficiency and allocative efficiency.
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