ACC 706 Lecture Notes - Financial Statement, Noise Trader, Capital Asset Pricing Model

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Gathering relevant information is costly, assume some rational investors are going to take advantage of new info. Share price will not be affected by decision making of few investors, they (all) have to make a right decision -> share prices fully reflect new information. New information is released and it definitely effects the share price. Share prices fully reflect information past or historical price only. Efficient securities market is one where the prices of the securities traded on that market at all times fully reflect all info that is publicly known about those securities ; Fully reflect information: they make not make the same decision, because they all have their own past believes. But our investors based on decision making theory, their decision making is independent. If this is good news, share price go up, bad. On average the market uses all available information. Market price is the average of the various individual investment decision.

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