Question

Question 3.

Write an example of an existing efficient market worldwide, and explain in your own word and  the reason behind the efficiency.

Answer 1

An efficient market is one where all the relevant information is available to all the participants at the same time and the price changes immediately according to the information available.One of example of efficient market is India Stock market. Indian stock markets are efficient in both weak and semi-strong form. Indian market has performed very well in last few years, supported by the growth in the global financial market. FDI and FIIs has incresed for India along with increase in trading activity in stock market.

The reason behind the efficiency of the Indian market is the transparency and easy accescibilty of information about the market to the internal and external users of this information. The availability of historical prices, annual reports of the comapnies, any major news on corporate governance and major mergers and acquisitions helps the analysts and the investors to make decisions based on these latest informations. The main reason behind the Indian market being not a strong form of efficient market is because of the uncertainity that exist due to changes in the government policies and the competiton in market. The stock of one company can be affected by change in governmant rules and regulations or by the strategy of the competitor, and as this information is not available to investor he can't make a fully informed decision.