Question

Research, define, describe, and explain the above-mentioned (Minimum 250 words answer for each questions)

Explain what the money market is and market efficiency

Answer 1

Money market is that section of the market where the instruments traded are highly liquid and short term in nature.The money market instruments are T-bills, commercial paper, repurchase agreements and asset backed securities.

Market efficiency:

Market are efficient when the stock prices completely reflect all the available information and the stock prices incorporate the information that is available publicly. The stock prices quickly reflect all information and no trader can earn an above normal profit.

The forms of market efficiency are:

Weak form : Weak form of market efficiency is when the past prices are not indicative of the future prices. The stock prices follow a random pattern and there is no connection between the past and the future prices which makes the technical analysis useless in weak form of efficiency.

Semi-strong form : In semi strong form of efficiency, stock prices reflect all public information . No trader can earn a profit on the basis of fundamental analysis. Any information released in the market is immediately reflected on the stock prices. Traders can only earn on any insider information.

Strong form of efficiency : In strong from of efficient markets, stock prices reflect all public and insider information. Thus, traders cannot earn a profit either by fundamental nor technical analysis and neither by the use pf public nor insider information.