Question

What if the Market was Perfectly Efficient? What would that mean for investors?

What if the Market was Perfectly INefficient? What would THAT mean for investors?

Answer 1

Efficient market means whether the market reflects all available information the investors have at any given time. The market efficiency theory states that all the investors have all the information in exactly the same manner. In this case the investors will not be able to gain greater profitability than the other investor with the same investment amount that is the investors would have identical returns on the same amount of capital invested.Also the investors will not be able to beat the market or the annual average return which all investors and funds are able to achieve using their best efforts.

The inefficient market is one in which an asset's market prices do not always exactly reflect its true value. In an inefficient market some investors can make excess returns while others can lose more than which is expected depending on the level of risk exposure. While in perfectly efficient market all the publicy available information is reflected on the price, the opposite is true for perfectly inefficient market where the prices do not reflect all the publicly available information.