Markets are said to be efficient if the market price is an unbiased estimate of the true value of the investment. It means that a market that is over pricing all assets has become inefficient. Market efficiency can go up or down from time to time. An efficient capital market has the following features:
- Operational efficiency– low transaction cost and transaction should be quickly completed.
- Pricing efficiency: prices should fully and fairly reflect all information.
- Allocational efficiency: capital market through the medium of pricing efficiency allocates the funds where they are best used.
There are three different levels or forms of efficiency. Continue reading “Market Efficiency”
Random walk theory gained popularity in 1973 when Burton Malkiel wrote A Random Walk Down Wall Street, a book that is now regarded as an investment classic. Random walk is a stock market theory that states that the past movement or direction of the price of a stock or overall market cannot be used to predict its future movement. Originally examined by Maurice Kendall in 1953, the theory states that stock price fluctuations are independent of each other and have the same probability distribution, but, over a period of time, prices maintain an upward trend.
In short, random walk says that stocks take a random and unpredictable path. Continue reading “Random Walk Theory”
There are several types on Investors in the market makinginvestments in one or more categories of assets with the objective of
making a profit. To name a few Individual investors, Angel investors, Sweat equity investor, Venture capitalist funds, Investment Trusts, Mutual funds, Hedge funds and Sovereign wealth funds.. here are some of the views how investment defined by them.
Warren buffet: A good business that can be purchased for less than the discounted value of its future earnings.
George Soros: An investment that can be purchased (or sold) prior to a reflexive shift in market psychology/fundamentals that will change Continue reading “Types of Investors in Financial Markets :-“