Financial Markets Efficiency Essay Example | Topics and Well Written Essays - 1000 words

Financial Markets Efficiency - Essay ExampleTherefore, this progress believe suggests that if everyone is aware of the price records, it is of no entertain. However, many financial analysts acquire wampum by evaluating pas prices using skilful analysis including pointing price policy or moving average technique, which according to this act has no value (Horne, 1990). Semi-strong form of market capacity says, Current prices have influence of all the reading that is publicly unattached (Williams, 2005). All the information takes into account the annual reports of the attach to that is balance sheet and income statements showing the status of assets and liabilities of the come with and telling about the revenues, expenses, and income of the company (Fleming, 2004). It also encounters the payment of dividends, announcement of merger plans, upcoming macroeconomics expectations pertinent to pretension and unemployment (Fleming, 2004). It needs non only to be financial but ever y aspect that is responsible for adding or subtracting value to the company. It can also be about the behavior of oversight with employees, the competence of research and developing department, quality of the products and perception about the company in publics mind. ... One needs to make a deep research to gather all the information, which is helpful in determining the current prices and acquiring profitable returns. The strong form of market efficiency does not only have impacts of public information but it also opts for information inside the company that is private information. Strong form is different from semi-strong form in a way that it does not want anyone to acquire profits even when public is not aware of the trading information at that time (Bollen & Inder, 2002). In simple words, it means that even the management and other important organizers of the company that is insiders should not be able to acquire profits on companys shares. As insiders have knowledge about pro fitable shares, so they should not acquire these shares after(prenominal) few minutes later they make the decision. Additionally, the members of R & D department should not get profits on information they discovered half an hour ago. The objective of strong form of market efficiency is that markets should possess abilities of anticipating in an impartial manner. However, this form of efficiency is very difficult to achieve as avariciousness for money and other monetary rewards can persuade ones inner light and convert it into flesh. The question arises that wherefore is there a need of efficient market. A market has to be efficient otherwise investors money would go nowhere. An efficient market is one where all the information influences the prices of shares. Market has to be full-size and all the information should be available to investors regarding a companys financial conditions (Bollen & Inder, 2002). In this smorgasbord of market, transaction costs should be less than the opportunity cost of investment. Opportunity cost is the