Stock Market efficiency (Marks and Spencer) Essay

Stock Market efficiency (Marks and Spencer) - Essay exercisingProponents of the efficient market hypothesis suggest that the market has a large number of players out to maximise profits. Each of these players logic whollyy analyzes the market information accessible so as to make an informed enthronization decision. This ensures that the market quickly and fairly represents all the available market in the prices of securities.There are iii types of market efficiency allocation efficiency, operation efficiency and pricing efficiency (Kraakman, 2003, p.11). Operational efficiency refers to the transactional cost involved in the selling and buying of securities. The operation of the London contrast exchange is streamlined and closely aligned to ensure operational efficiency. Allocation efficiency follows the premise that there are limited fiscal resources and therefore the existing resources are invested in the most productive way (Cassedy, 2004, p.6). This suggests that the inves tors are rational and that available capital is directed to the most profitable stock. Pricing efficiency is based on the premise that the stock fairly and instantly reflects information available in the stock market. Most of the theories developed in the playing field of market efficiency revolve around pricing efficiency. Pricing efficiency suggests that a securitys price reflects all the available information.Market efficiency can be said to exist in three distinct levels. These are Weak-form efficiency, Semi-strong efficiency and Strong-form efficiency (Banks, 2011, p.3). The weak-form efficiency suggests a market that reflects all the noncurrent market information. The ancient information is fully and instantly reflected in the price of securities. This view therefore suggests that the past market information cannot be used to predict future prices of securities. This is because listed financial securities already reflect all past market data.Semi strong