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    Characteristics of an efficient market

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    Question 1.

    What are the characteristics of an efficient market?

    Please provide at least one citation.

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    There are several characteristics that we can look for to determine the efficiency of a market. The three main establishing criteria typically include return predictability, the financial market link to the real economy, and persistence in performance (Davis, 2006). The return predictability measures the difference between returns that have been realized and the expected returns, under the assumption that the returns should not be predictable in an efficiently run market. The differences that constitute cross-sectional aspects in the expected return typically are related to the risk factors present in the current ...

    Solution Summary

    The expert determines what are the characteristics of an efficient market.