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Investors in the financial market assume that the system is? A.) Inefficient B.) Efficient/Perfect C.) Imperfect...

Investors in the financial market assume that the system is? A.) Inefficient B.) Efficient/Perfect C.) Imperfect D.) all of the above

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Answer #1

Investors assumes A) Efficient

Efficient market says that all the information is priced in the asset. Every market participant has the equal access to the information. All information is available to public and has been priced by the market. The move of asset will now be determined by latest news of financial performance.

The Academic assumption is that system is efficient. But the assuption is challanged in modern economics. Challangers argue that if markets are efficient, no-one would be making cross trade. Inefficiencies in the markets govern the behaviour of investors.

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