Question

Do you think stock markets are efficient? If so, why? If not, why not?

Answer 1

The stock markets cannot be generalized to be efficient or inefficient. For example, the US stock markets and those in Europe are nearly efficient as it is very difficult for any actively managed fund to beat the index and this means that price distortion is present for a very small time and thus there is very little information asymmetry which is suggestive of efficient markets.

On the other hand, if we look at stock markets in the emerging markets, the actively managed funds have been able to beat the index quite successfully over a long term and this implies that information asymmetry does exist which is suggestive of inefficient markets.

So it would be safe to conclude that markets in developed economies are more efficient than emerging markets.