Is the market for all stocks equally efficient? Explain.

Is the market for all stocks equally efficient? Explain.

Expert Solution

No, Market for all stocks are not equally efficient because of these stocks has different risk associated with them and the market participants are not adequately behaving in an efficient way for all stocks so that it can be said that the market is not equally efficient for the all stocks.

Stocks are subject to insider trading as all the privately available information are not adequately discounted and these stocks are often subjected to misappropriation in the books of accounts, so that they have lost their trustworthiness among the investors and their credibility is also questionable sometimes so those corporate management who have high trustworthiness will be always commanding premium in respect to their peers when it comes to corporate governance and information related to these stocks will be adequately discounted in their stock price but other stocks who have questionable credibility will be subject to insider trading and their stocks would not be reflecting the true disclosure of accounting policies and principles, and market for them are not as efficient as those stocks who have a high credibility.

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