Market Efficiency & its forms

Lets pick up from yesterday post. Empirical tests of the efficiency of capital markets have examined the extent to which the prices of securities reflect relevant information, i.e. pricing efficiency, because of lack of data for testing allocational and operational efficiency. Many studies have examined the extent to which it is possible to make abnormal return in excess of expected returns.

Markets are said to be “weak form efficient” if current security price reflect all past movements of share prices. It means it is not possible to make Continue reading “Market Efficiency & its forms”

Market Efficiency and Facebook

Wow  Facebook Inc. is all set for its initial public offering price range of between the high-$20s to the mid-$30s per share, The Wall Street Journal reported Thursday, citing unnamed sources. The social media company also seeks a valuation of $85 billion to $95 billion.

The above head line encourages me to write on the controversial topic  Market Efficiency. Capital markets are markets for trading in long-term financial instruments. Capital markets have two main functions: as primary market they provide the means whereby long-term funds can be raised; as secondary markets they provide the investors to sell Continue reading “Market Efficiency and Facebook”