Question

1. Explain what “efficient” means with regard to the stock market. Is the stock market of the U.S. efficient in pricing stock?
2. The stock markets in the U.S. are more efficient than in many other countries. Does that mean that all information is available to all investors?

Answer 1

Efficient market is the market is a market place where each and every market information affects the stock price. when a market is said to be efficient, the risk factor is also high. Here stocks are traded at face value of the share. Since risk is high it will be difficult for the investors whether to choose the investment or not. In an efficient market the present prevailing information only considered while decision making, here buyers and sellers can gain at their expected price. Another important feature of efficient market is that, it doesn't have transaction cost.  Insider information highly affect the value of the stock. when investors came to know that a company stock is undervalued they rush to buy such shares and there by stock price increases. American stock market have a trend to change from time to time. In American markets seasonal changes are happening. When U.S market is efficient, every investors are aware of information in that market.