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What is the informational efficiency of financial markets?

Management Dictionary
Corporate and Market Finance

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An efficient market is one in which the price of financial securities reflects all relevant information available at any given time.

There are three degrees of efficiency, based on (1) the ability to predict future prices, (2) the market’s response to specific events, and (3) the influence of inside information on the market.
Informational efficiency is the most thoroughly tested hypothesis in finance.
“Anomalies” challenge the informational efficiency of financial markets.

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Keywords

Anomalies, Event studies, financial markets, Information efficiency

Author(s)

LAJILI JARJIR Souad

Master's program director

IAE-Gustave-Eiffel

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