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The Value of an Efficient Market

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Why is it important that the financial markets are efficient?

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Solution Summary

The answer discusses why it is 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 ...

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