RSM332H1 Chapter Notes -Efficient-Market Hypothesis, Technical Analysis, Capital Market
Document Summary
An efficient market condition in which transaction costs are low. An efficient market condition in which there are enough securities to efficiency allocate risk. An efficient market condition in which important information is reflected in share prices. That is, material facts are publicly disclosed and investors use all publicly available information in their investment decisions. A market that reacts quickly and relatively accurately to new public information, which results in prices that are correct (fairly valued) on average. True market efficiency is not practical in real life because it requires instantaneous and perfect price adjustments. Assumptions of an efficient market: there are a large number of rational, profit-maximizing investors who actively analyze, value, and trade securities. Securities analysts whose job it is to monitor companies and regularly report on their value through earnings forecasts and buy/sell/hold recommendations; they work for investment banks that underwrite and sell securities to the public.
