Capital Market Efficiency

Anonymous

Question Description

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.

Assignment Steps

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.


Tutor Answer

toto
School: Duke University

Attached.

Running head: CAPITAL MARKET EFFICIENCY

Capital Market Efficiency
Name
Institutional Affiliation

1

CAPITAL MARKET EFFICIENCY

2

Behavioral Changes in Achieving Efficiency
According to behavioral economists, the mixture of biases that includes information,
overreaction, overconfidence and misrepresentation are the leading causes of the inefficiencies
abounding in the financial markets. Behavioral challenges to efficiency within capital markets
include human errors that may be broken down further into processing errors and information
mishandling. These are errors that occur often and some of them are even allowed. Other errors
of this nature include mistakes in reasoning and judgement. As human beings, we do not have to
be perfect at all times. This is why there is room for this type of error a...

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Anonymous
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Anonymous
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