What is an efficient market?

Efficient markets are especially useful for agents with the largest presence in the market. financial market. An efficient market is one in which the prices of the assets that are quoted in it reflect all the information available in the market.

Agents use the information that the financial assets it gives them to make decisions, so the information is incorporated into the price as it arrives.

Investors tend to look for efficient markets: the more efficient prices, the better the reflection of the value of the assets and, therefore, greater security. In efficient markets, the price of financial assets are trading at their fair level, and truly reflects the real value you have at all times.

However, finding a market that is fully efficient is difficult, but not impossible. These are some characteristics (we see them below) that must be followed with rigorous respect.

Characteristics of efficient markets

Regarding the characteristics that define an efficient market, we have to highlight the following:

  • The information must be available to all audiences. There are markets in which certain users of some information are excluded, in order to create deficiencies.
  • Being able to access the necessary information does not have to be a cost. This is especially linked to the previous point, since there are times when it is intended to omit or hide information in order to "sell" at a good price.
  • The prices of the products that compete in the market must be adapted to the information that is received. In this sense, bad harvests, bad weather or unfavorable political situation play against the efficiency in the market.
  • There must be a large number of participants in the market, in order for there to be information flows in that market.

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