The following are the requirements of securities market to be efficient:
(1) Prices must be efficient and so new innovations and better products will cause a company’s securities prices rise.
(2) Information must be discussed freely and quickly across the nation so all investors can react to new information.
(3) Transaction costs are ignored (i.e. brokerage or commission).
(4) Taxes are assumed to have no noticeable effect on investment policy.
(5) Every investor is allowed to borrow or lend at the same rate.
(6) Investors must be rational and able to recognise efficient assets and invest money where it is needed most.
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