Inefficient Market

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Dictionary Says

Definition of 'Inefficient Market'

A theory which asserts that the market prices of common stocks and similar securities are not always accurately priced and tend to deviate from the true discounted value of their future cash flows. This theory opposes the efficient market hypothesis.

The phrase is also used to refer to a market which is not operating efficiently; for example, it could be argued that the low-volume stocks traded over the counter comprise an inefficient market compared to blue chip stocks.
Investopedia Says

Investopedia explains 'Inefficient Market'

The inefficient market hypothesis and its proponents contend that market forces sometimes drive asset prices above or below their true value. They find support for their argument from instances of market crashes or upward spikes, whose existence and magnitude are seemingly incompatible with an efficient market point of view.

Thus, in an inefficient market, some securities will be overpriced and others will be underpriced, which means some investors can make excess returns while others can lose more than warranted by their level of risk exposure. If the market were entirely efficient, these opportunities and threats would not exist for any reasonable length of time, since market prices would quickly move to match a security's true value as it changed. While financial markets appear reasonably efficient, events such as market-wide crashes and the dotcom bubble of the late '90s seem to reveal some sort of inefficiency within the markets.
Search results for

'Inefficient Market'

  • 4 Ways To Predict Market Performance

    http://www.investopedia.com/articles/07/mean_reversion_martingale.asp
    ... Their hope is that an inefficient market has underpriced the stock, but
    that the price will adjust over time. The question is does ...

  • Do noise traders have any long-term effect on stock prices?

    http://www.investopedia.com/ask/answers/06/noisetradinglongterm.asp
    ... theories that are used to describe how securities are priced in the stock market:
    the efficient market hypothesis (EMH) and the inefficient market hypothesis. ...

  • What is an efficient market and how does it affect individual ...

    http://www.investopedia.com/ask/answers/05/marketefficiency.asp
    ... What is an efficient market and how does it affect individual investors?
    When people talk about market efficiency they are referring ...

  • What Is Market Efficiency?

    http://www.investopedia.com/articles/02/101502.asp
    ... This results in stock prices being distorted and the market being inefficient. So
    prices no longer reflect all available information in the market. ...

  • Exploring Real Estate Investments: Characteristics Of Real Estate ...

    http://www.investopedia.com/university/real_estate/real_estate3.asp
    ... And, when the building starts to age, it needs to be renovated. Inefficient
    Markets An inefficient market is not necessarily a bad thing. ...

  • Flipping Houses: Is It Better Than Buy and Hold?

    http://www.investopedia.com/articles/mortgages-real-estate/08/flipping-flip-properties.asp
    ... Real estate is a unique asset class in that compared to stocks and bonds, it is
    a relatively inefficient market and is characterized by low transaction volume ...

  • The Minimum Wage: Does It Matter?

    http://www.investopedia.com/articles/07/minimum_wage.asp
    ... imposition of an artificial value on wages that is higher than the value that would
    be dictated in a free-market system creates an inefficient market and leads ...

  • Buy What Mr. Market Hates

    http://stocks.investopedia.com/stock-analysis/2009/Buy-What-Mr.-Market-Hates-EGLE-KHD-DRYS-GHM1020.aspx
    ... Free Stock Analysis By Email. Inefficient Markets It doesn't take a genius to
    understand why Graham felt this way. Stocks most favored by the market attract a ...

  • A Market That Will Drive You To Drink

    http://stocks.investopedia.com/stock-analysis/2010/A-Market-That-Will-Drive-You-To-Drink-ABV-BUD-HINKY-LVMUY-STZ-DEO-CEDC0531.aspx
    ... That being said, we are still talking about the market leader in American ... a regional
    industry that has often languished due to inefficient management practices ...

  • CFA Level 1 Study Guide - Microeconomics - Market Efficiency ...

    http://www.investopedia.com/exam-guide/cfa-level-1/microeconomics/market-efficiency.asp
    ... 1.9 Standard II-B: Market Manipulation; 1.10 Standard III-A: Loyalty, Prudence And
    Care; ... 12.14 Market Anomalies; 12.15 Implications of Efficient Markets. 13. ...

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