Market Efficiency
If prices properly reflect available information , then markets are said to be efficient.
Semi strong form efficient
Markets are said to be semi strong form efficient if the prices are unbiased based on all publicaly information
Strong Form efficient
Markets are said to be strong form efficient if the prices are unbiased based on all information (public and private).
Who cares about market efficiency?
1) Investors
If investors find that prices are predictable, then smart investors can earn extra return at the expense of naive investors.
2) Companies
If markets are efficient aggregators of information, then companies can learn from the stock price reactions.
3) Government and public
They are concerned about market efficiency because of the effect on economic growth and allocation of resources.
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