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Finance by Lucia Staszkiewicz, Piotr Staszkiewicz

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Chapter 4

Hypothesis of Informational Efficiency of Financial Markets

Abstract

Price reflects the information available on the market. Markets are different in their abilities to process information. If the market is efficient, there is a lack of motivation for investors to process information.

Keywords

weak form
strong form
semieffective form
behavioral finance
coherent market
image

4.1. Efficient market

An efficient capital market is when:
1. The price of securities bought and sold reflects all relevant information. Share prices change immediately to reflect new information.
2. There is competition in the market (lack of concentration) ...

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