Securities trading — market efficiency
Market efficiency is the degree to which market prices reflect all available relevant information.
Efficient markets have all information incorporated into prices, so that there is no way to “beat” the market because there are no under or overvalued securities available.
Efficiency in a market is also achieved when transaction costs are low, when there are no impediments to trading and nobody is able to influence prices permanently.
Market efficiency can be broken down into three categories, namely: Weak form efficient — This is when traders cannot predict future price changes based on past price changes. Semi-strong form efficient — This is the assumption that current security prices change quickly due to new public information being released. Strong-form efficiency — This is when all information in a market whether private or public is accounted for in a security’s price, therefore making it hard for traders to predict prices. It assumes that no one will be able to benefit from insider trading. Logically the market efficiency hypothesis cannot always be true for all traders. If it was always true, prices would always equal fundamental security values, so that informed traders could not profit from their research. Therefore, informed traders would not invest in obtaining information, and would not trade.
In order for a market to be perfectly efficient there needs to be the following: An analysis system of pricing securities that is accepted by everyone. Absence of human emotions when it comes to making decisions related to investments. Acceptance by all investors that their returns or losses will be exactly the same as other market participants. Upcoming AGMs and EGMs Amalgamated Regional Trading (ART) Holdings Limited, 202 Seke Road, Graniteside, Harare, Zimbabwe, 27 February 2019, 1430 hours. CAFCA Limited, 54 Lytton Road, Workington, Harare, 28 February 2019, 1200 hours. Powerspeed Electrical Limited, Gate 1, Powerspeed Complex, Corner Cripps Road and Kelvin Road North, Graniteside, Harare, 28 February 2019, 1100 hours.