False Market

DEFINITION of 'False Market'

A market where prices are manipulated and impacted by erroneous information, preventing the efficient negotiation of prices. These types of markets will often be marred by volatile swings because the true value of the market is clouded by the misinformation.

BREAKING DOWN 'False Market'

When investors use inaccurate information to guide their decisions, they tend be irrational and over- or underreact to news. The illogical decisions made by these investors skew the market, causing the true value of a security to be misrepresented