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Three Forms Of Financial Market Efficiency - Essay Example

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There are three forms of efficiency that can be addressed while discussing the financial market efficiency. The paper "Three Forms Of Financial Market Efficiency" gives the important information about these three forms and explains behind the fact that financial markets are required to be efficient…
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Three Forms Of Financial Market Efficiency
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Download file to see previous pages Operational Efficiency: One of the main preconditions for attaining allocational efficiency is the operational efficiency. An operationally efficient financial market is the one in which sellers and buyers are able to purchase the products and services at a price which is as low as possible considering the costs of providing the services (Hasenpusch, 2009). In such a market transaction costs as well as the administrative costs are minimized. Furthermore, lenders and borrowers are subjected to maximum convenience at the time of mobilizing the resources (Bhole, 2004).  Failure to attain operational efficiency means transaction costs are quite high and as a result number of financial transactions will be lowered. This, in turn, would make the companies delay their investment plans which may make the society worse off. The study on operational efficiency actually inspects whether the financial services that are offered by various organizations are provided without violating criteria regarding industrial efficiency. In other words, any study on this concept examines the competition among various financial service providers as well as among various financial markets. Furthermore, it also examines the commission fees (Bailey, 2005).Informational Efficiency: ‘Information' has been one of the key aspects of the process of making financial markets efficient. Informational efficiency is referred to the degree to which prices of the assets reflect the information that is available to the investors. ...Download file to see next pages Read More
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