What are the features of the efficient capital market?

The

capital market can be defined narrowly as a market for investors to trade in securities, and wide as a market for companies and governments to raise money or capital. The efficient capital market is a market where prices are rapidly changing into response to changes in demand and supply, thus creating “fair” prices at any time. In addition to information, the efficient capital market will usually require liquidity through sufficiently large collection of traders to accurately affect prices. It is usually defined as securities where the issuer will have more than a year to return the initial payment. This means that short -term securities, such as the Treasury, are instead traded on a different type of market, usually called the cash market.

There are two main forms of the capital market. The primary market is a market in which companies and governments create and sell securities, often through an subscriber. The secondary market is the market in which traders buy and sell these securities with each other, which means thatThe investor who eventually applies debt security or receives dividends on stocks is often not an investor who originally paid money to the issuer.

The efficient capital market is usually defined by the availability and accuracy of information about securities and their prices. The theory of economic market is usually based on the idea that each trader has full information about the available securities and the required price, along with any other details that could be relevant, such as the past market behavior, company's performance, or probability that the debt security publisher repays money as prevented. The more efficient the capital market is, the closer the real situation in this hypothetical situation. The idea is that the more Effictern Trace, the more informed the judgments and decisions of investors, and therefore the money is generally assigned in the most productive way.

One classification gives three levels of efficiency. The weak efficient capital market is one where only information about the past is reflected in prices. The semi -inferior market is a market where current information is publicly available all investors and reflects in prices. A strong effective market is a market where investors are known to all information, even information that is not publicly available; This is an effectively situation assuming market theories, but unlikely in the real world.