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.
Explanation & Answer
Attached.
Running Head: CAPITAL MARKET EFFICIENCY
Capital Market Efficiency
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Tutor
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CAPITAL MARKET EFFICIENCY
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A capital market can be described as the ownership of the capital stock of an economy
being distributed. Similarly, it can be described as a market in which decision making of both
firms and investors involves the choosing of securities that have knowledge that is all available.
For an efficient market, therefore, there ought to be an all-information reflecting the price.
Describe the behavioral challenges in achieving efficiency.
One of the behavioral challenges that are presented in the achievement of market
efficiency is having similarity in the rationality deviations across the involved investors. Another
argument put forward is that investors are thought not to be rational. Finally, the costliness of
arbitrage does not help with the elimination of inefficiencies. Behavioral finance is details...
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