Purpose of Assignment
The purpose of this assignment is to allow the student an opportunity to explain what it means to have an efficient capital market. Students will gain an understanding of the different levels of market efficiency and how behavioral finance can inhibit reaching market transparency.
Resources: Microsoft® Word
Explain in 525 words what it means to have efficient capital market, including:
- Describe the behavioral challenges in achieving efficiency.
- Discuss the three forms of market efficiency.
- What are the implications to corporate finance?
- Would you consider the real estate market an efficient capital market? Please explain why or why not.
Explanation & Answer
Hi,Find attached the completed work.Feel free to ask for any clarification or editing if need be.Looking forward to working with you in the future.Thank you.
An efficient capital market is that which has the information regarding the securities
value already incorporated into the prices in real time and in an accurate manner. The
fluctuations present in securities value are dependent on the present value of future cash flows.
For this reason, a capital market that is efficient enables these fluctuations to be reflected in the
current price of the securities (Vernimmen et al., 2014).
According to behavioral finance, the market is not efficient because of the several
challenges it is exposed to. To begin with, investors display no rationali...
24/7 Homework Help
Stuck on a homework question? Our verified tutors can answer all questions, from basic math to advanced rocket science!