Definition of Market efficiency:
The term was taken from a paper written in 1970 by economist Eugene Fama, however Fama himself acknowledges that the term is a bit misleading because no one has a clear definition of how to perfectly define or precisely measure this thing called market efficiency. Despite such limitations, the term is used in referring to what Fama is best known for, the efficient market hypothesis (EMH).
Measure of the availability (to all participants in a market) of the information that provides maximum opportunities to buyers and sellers to effect transactions with minimum transaction costs.
Market efficiency refers to the degree to which market prices reflect all available, relevant information. If markets are efficient, then all information is already incorporated into prices, and so there is no way to "beat" the market because there are no undervalued or overvalued securities available.
How to use Market efficiency in a sentence?
- We excelled in market efficiency and people would come to us in order to learn about our secrets and what we did.
- You should strive to have great market efficiency with your product so that people can always rely on it doing well.
- Market efficiency refers to how well current prices reflect all available, relevant information about the actual value of the underlying assets.
- A truly efficient market eliminates the possibility of beating the market, because any information available to any trader is already incorporated into the market price.
- As the quality and amount of information increases, the market becomes more efficient reducing opportunities for arbitrage and above market returns.
- You should try to figure out how to make your product have great market efficiency so that it is always selling well.
Meaning of Market efficiency & Market efficiency Definition