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Friday, October 16, 2009

Efficiency in the buying/selling, often mismatch, stock market

I suppose in any market, be it food market or stock market, pricing mismatch occurs everyday. That is why in every transaction, there is a seller who believe that the price is too high/low, and a buyer who believe the price is too low/high.

In an efficient market, the market returns is difficult to beat even with much effort trying to do so. Eg. Suppose Stock A generates a return of 50% over the past year, and an active investor tries to beat it. Stock A will be deemed as efficient if the investor finds it hard to generate a higher than 50% returns.

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