It is impossible for markets to incorporate all information into prices.

Question

Quizplus · Accepted Answer

The concept of efficiency is sometimes seen in extremes;that is,the market is either efficient or inefficient.Practitioners are often classed as believers in market inefficiency while academics are believers in market efficiency.These extreme views cloud the debate,as the issue is not black and white.No one seriously believes that the market incorporates all information into share prices.Such an extreme view implies that prices incorporate all private information including that which is confidential and privy only to a company's board of directors.At the other extreme,no one seriously believes that the knowledge of any random piece of information can be used to earn excess returns.Hence,market efficiency (or inefficiency)is a matter of degree.

It Is Impossible for Markets to Incorporate All Information into Prices