Question

The significance of the U.S. market’s efficiency and its importance in global finance.

What would happen if U.S. markets became less efficient?

Answer 1

The significance of the US market efficiency are that

Most of the research in finance from the very past years are done on the basis of the subject to market efficiency . The Findings in it are based commonly on the investigation on two exchange markets in the united states (US) which indicated that these are efficient securities market. Every price in the market can show or reflect all the information that is avaiable so that any new information if comes can not be used to generate returns. That is the importance of the US market efficiency.

The importance of it in global Finance :-

1. Stability in the prices of the securities , no new information can highly affect the prices.

2. Lower transactions cost in the market , that transaction costs means cost of obtaining informations and costs of trading etc.

If the US market became less efficient then in case :-

1. Then there is a lower trade volume in the market

2. Wide fluctuations are arising in the market due to inefficiency

3. Reliable information about the firms are very costlt to obtain.

4. Transactions costs are very much increased in case of inefficiency.