Chapter 3 - Market efficiency . The topics discussed in this chapter are: Definition of efficient markets; different forms of market efficiency; evidence regarding market efficiency; implications for fundamental analysis, technical analysis, and portfolio management; market pricing anomalies; behavioral finance. | Chapter 3 Market Efficiency Presenter Venue Date Market efficiency concerns the extent to which market prices incorporate available information. If market prices do not fully incorporate information, then opportunities may exist to make a profit from the gathering and processing of information. Governments and market regulators also care about the extent to which market prices incorporate information. Efficient markets imply informative prices—prices that accurately reflect available information about fundamental values which, in turn, helps foster economic growth. Section 2 provides specifics on how the efficiency of an asset market is described and discusses the factors affecting (., contributing to and impeding) market efficiency. Section 3 presents an influential three-way classification of the efficiency of security markets and discusses its implications for fundamental analysis, technical analysis, and portfolio management. Section 4 presents several market anomalies . | Chapter 3 Market Efficiency Presenter Venue Date Market efficiency concerns the extent to which market prices incorporate available information. If market prices do not fully incorporate information, then opportunities may exist to make a profit from the gathering and processing of information. Governments and market regulators also care about the extent to which market prices incorporate information. Efficient markets imply informative prices—prices that accurately reflect available information about fundamental values which, in turn, helps foster economic growth. Section 2 provides specifics on how the efficiency of an asset market is described and discusses the factors affecting (., contributing to and impeding) market efficiency. Section 3 presents an influential three-way classification of the efficiency of security markets and discusses its implications for fundamental analysis, technical analysis, and portfolio management. Section 4 presents several market anomalies (apparent market inefficiencies that have received enough attention to be individually identified and named) and describes how these anomalies relate to investment strategies. Section 5 introduces behavioral finance and how that field of study relates to market efficiency. Section 6 concludes and provides a summary. DISCLAIMER: Candidates should understand this presentation is NOT a substitute for a thorough understanding of the CFA Program curriculum. This presentation is NOT necessarily a reflection of all of the knowledge and skills needed for candidates to successfully complete questions regarding this topic area on the CFA exam. 1 Definition of an Efficient Market LOS: Discuss market efficiency and related concepts, including their importance to investment practitioners. Page 111 The term efficient market is a reference to informationally efficiency and is a market where asset prices reflect all available information. 2 Factors Affecting Market Efficiency LOS: Explain the factors .
