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The financial markets context
How do financial markets match providers with users, and how efficiently does the...
How do financial markets match providers with users, and how efficiently does the market determine prices? Can investors rely on notoriously volatile stock markets to function efficiently? It can be difficult to determine whether successful investments are a matter of skill and luck. In this unit, you will interrogate whether markets can function efficiently, and what factors might militate against this. You will also learn the importance of the Efficient Markets Hypothesis.
By the end of this unit you should be able to:
- make an informed judgement about whether or to what extent a financial market satisfies the conditions of an efficient market;
- identify the main factors that could detract from that efficiency.
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The financial markets context
How do financial markets match providers with users, and how efficiently does the market determine prices? Financial markets can be notoriously volatile, and the stock market is possibly the most volatile of them all. This is after all the place where, depending on skill or on luck, investors either ‘make a killing’ or ‘lose their shirts’. But which does it depend on – skill or luck? Or does it depend on a mixture of the two? In this unit, you will find the answers to these key questions and discover the importance of the Efficient Markets Hypothesis.
This material is from our archive and is an adapted extract from Financial strategy (B821) which is no longer taught by The Open University. If you want to study formally with us, you may wish to explore other courses we offer in this.
This is an extract from an Open University course which is no longer available to new students. If you found this interesting you could explore more free Accounting and Finance courses or view the range of currently available OU Accounting and Finance courses.
Copyright & revisions
Originally published: Thursday, 19th July 2012
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