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Discussion Forum Unit 3
________________________________________
Review the material in Chapter 7.
• How do information systems affect Market Efficiency?
Financial Information Systems (FIS) are computer systems that gather, store, and analyze
financial and market information. Companies and individuals utilize the information gathered in
these systems to forecast trends and estimate the results of their financial actions. Bloomberg and
Reuters are two instances of reliable and extensively used information services. (Kolakowski,
2021) Both of these systems use complex algorithms to track second-by-second financial data,
company news headlines, and stock prices. These kind of information technologies have made
financial data readily available to the general public, rather than only to the frenetic Wall Street
traders.
Market Efficiency - This is the idea that markets are efficient because a financial security's price
will always be at its equilibrium price. No one should be able to influence the price of a security,
in other words. Rather, the value is determined by the market. An example is the best method to
illustrate this: Turnips are being sold for $5 apiece by a new farmer at a local market. Because he
is new to the turnip game, he has no clue if this is a reasonable price. He works for the entire day
and only earns a few sales. He sees his turnips are starting to go bad the next day, so he decreases
the price. His sales improve somewhat. This cycle repeats itself over the next several days until
he achieves a price at which he sells precisely the number of turnips he brought by the end of the
day. At a certain price point, supply and demand are equal. This is the price of balance. A

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completely efficient market is always at a price that is in the middle of its range.
Given that "the market's valuation is always right, given the facts available at the time," This is
contingent on one essential factor: the accuracy of the information provided. (Wright &
Quadrini, 2009) This information is provided through information systems. Market information
used to be rarely up to current in the past. The news of a potential potato scarcity might take
weeks to propagate. People who have knowledge of the potato scarcity may hoard potatoes and
sell them when the shortage occurs. . Arbitrage is when someone takes advantage of a price
difference and swiftly buys and sells for a profit. Information systems improved over time, and
data moved more quickly. Markets got more efficient as data became more freely available. "All
untapped profit potential, not only arbitrage chances, will be removed as rapidly as the existing
technology set allows in an efficient market." This suggests that, in addition to arbitrage, insider
information, corruption, and bad asset allocation all decreased.
References
Wright, R.E. & Quadrini, V. (2009). Money and Banking. Saylor Foundation. Licensed under
Creative Commons Attribution-NonCommercial-ShareAlike CC BY-NC-SA 3.0 license.
Available from: https://www.saylor.org/site/textbooks/Money%20and%20Banking.pdf
Kolakowski, Mark. June 17, 2021. Bloomberg vs. Reuters: What’s the Difference?
Investopedia. Retrieved 2 July 2021,
from https://www.investopedia.com/articles/investing/052815/financialnews-
comparison-bloomberg-vs-reuters.asp
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Discussion Forum Unit 3 ________________________________________ Review the material in Chapter 7. • How do information systems affect Market Efficiency? Financial Information Systems (FIS) are computer systems that gather, store, and analyze financial and market information. Companies and individuals utilize the information gathered in these systems to forecast trends and estimate the results of their financial actions. Bloomberg and Reuters are two instances of reliable and extensively used information services. (Kolakowski, 2021) Both of these systems use complex algorithms to track second-by-second financial data, company news headlines, and stock prices. These kind of information technologies have made financial data readily available to the general public, rather than only to the frenetic Wall Street traders. Market Efficiency - This is the idea that markets are efficient becau ...
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