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The Value of an Efficient Market

Why is it important that the financial markets are efficient?

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It is important that financial markets are efficient for at least three reasons:
To encourage share buying - accurate pricing is required if individuals are to be encouraged to invest in companies. If shares are incorrectly priced, many savers will refuse to invest because of a fear that when they have to sell their shares the price may be to their disadvantage and may not represent the fundamentals of the firm. This will ...

Solution Summary

The answer discusses why it is important that the financial markets are efficient.