Allocational Efficiency

Dictionary Says

Definition of 'Allocational Efficiency'

A characteristic of an efficient market in which capital is allocated in a way that benefits all participants. Allocational efficiency occurs when organizations in the public and private sectors can obtain funding for the projects that will be the most profitable, thereby promoting economic growth.
Investopedia Says

Investopedia explains 'Allocational Efficiency'

In order to be allocationally efficient, a market must meet the prerequisites of being both informationally efficient (where much is known by all), and transactionally or operationally efficient (where transaction costs are reasonable and fair). If all conditions are met, capital flows will direct themselves to the places where they will be the most effective, providing an optimal risk/reward scenario for investors.

Articles Of Interest

  1. The Uncertainty Of Economics: Exploring The Dismal Science

    Learning about the study of economics can help you understand why you face contradictions in the market.
  2. What is GDP and why is it so important?

    The gross domestic product (GDP) is one the primary indicators used to gauge the health of a country's economy. It represents the total dollar value of all goods and services produced over a ...
  3. How Risk Free Is The Risk-Free Rate Of Return?

    This rate is rarely questioned - unless the economy falls into disarray.
  4. Top 4 Most Scandalous Insider Trading Debacles

    Here we look at some of the landmark incidents of insider trading.
  5. Nobel Winners Are Economic Prizes

    Before you try to profit from their theories, you should learn about the creators themselves.
  6. The Nash Equilibrium

    Nash Equilibrium is a key concept of game theory, which helps explain how people and groups approach complex decisions. Named after renowned mathematician John Nash, the idea of Nash Equilibrium ...
  7. The Copper King: An Empire Built On Manipulation

    Find out how Yasuo Hamanaka's actions in the copper market forever changed the rules for commodity traders.
  8. 7 Controversial Investing Theories

    We take a closer look at the theories that attempt to explain and influence the market.
  9. Forces Behind Interest Rates

    Get a deeper understanding of the importance of interest rates and what makes them change.
  10. Breaking Down The Geometric Mean

    Understanding portfolio performance, whether for a self-managed, discretionary portfolio or a non-discretionary portfolio, is vital to determining whether the portfolio strategy is working or ...
comments powered by Disqus
Marketplace
Hot Definitions
  1. Racketeering

    Racketeering refers to criminal activity that is performed to benefit an organization such as a crime syndicate. Examples of racketeering activity include...
  2. Lawful Money

    Any form of currency issued by the United States Treasury and not the Federal Reserve System, including gold and silver coins, Treasury notes, and Treasury bonds. Lawful money stands in contrast to fiat money, to which the government assigns value although it has no intrinsic value of its own and is not backed by reserves.
  3. Fast Market Rule

    A rule in the United Kingdom that permits market makers to trade outside quoted ranges, when an exchange determines that market movements are so sharp that quotes cannot be kept current.
  4. Absorption Rate

    The rate at which available homes are sold in a specific real estate market during a given time period.
  5. Yellow Sheets

    A United States bulletin that provides updated bid and ask prices as well as other information on over-the-counter (OTC) corporate bonds...
  6. Bailment

    The contractual transfer of possession of assets or property for a specific objective.
Trading Center