Question

POINT/COUNTER-POINT: Is The Stock Market Efficient?

POINT: Yes. Investors fully incorporate all available information when trading stocks. Thus, the prices of stocks fully reflect all information.

COUNTER-POINT: No. The high degree of stock price volatility offers evidence of how much disagreement there is among stock prices. The fact that many stocks declined by more than 40 percent during the end of 2008 and beginning of 2009 suggests that stock prices are not always properly valued to reflect available information.

(Which is correct, and what's your opinion?)

Answer 1

Stock market is not fully efficient because stock prices does not reflect all available public as well as private informations. There is also scope for beating index return by larger margins which can be reflected by performance of different type of hedge funds as well as companies like Berkshire Hathway.

there have always been investors who have outperformed the index for Greater period of time so the market cannot be said to be completely Efficient.

I will agree with the counter point because the volatility in the stock market prices is also a reflection of how much disagreement exist between different people relating to price of different securities . Stock market can never be properly valued because there are different perceptions because some are highly aggressive and some are low risk takers.