Informationally Efficient Market

AAA

DEFINITION of 'Informationally Efficient Market'

A theory, which moves beyond the definition of the efficient market hypothesis, that states that new information about any given firm is known with certainty, and is immediately priced into that company's stock.

INVESTOPEDIA EXPLAINS 'Informationally Efficient Market'

Before any big news release, a company's stock may change in value, due to investors and traders speculating on the stock's intrinsic value after the news release. In an informationally efficient market, there will be little to no price change after the news release comes out. Under this hypothesis any changes in stock price, after a news release, would be due to the interpretation of the news by individual analysts.

RELATED TERMS
  1. Stock Market

    The market in which shares of publicly held companies are issued ...
  2. Stock

    A type of security that signifies ownership in a corporation ...
  3. Efficient Market Hypothesis - EMH

    An investment theory that states it is impossible to "beat the ...
  4. Market Timing

    1. The act of attempting to predict the future direction of the ...
  5. Strong Form Efficiency

    The strongest version of market efficiency. It states all information ...
  6. Premium to Surplus Ratio

    Net premiums written divided by policyholders’ surplus. The premium ...
Related Articles
  1. Active Trading Fundamentals

    Understanding Investor Behavior

    Discover how some strange human tendencies can play out in the market, posing the question: are we really rational?
  2. Active Trading Fundamentals

    Efficient Market Hypothesis: Is The Stock Market Efficient?

    Deciding whether it's possible to attain above-average returns requires an understanding of EMH.
  3. Investing

    What is an efficient market and how does it affect individual investors?

    When people talk about market efficiency they are referring to the degree to which the aggregate decisions of all the market's participants accurately reflect the value of public companies and ...
  4. Trading Strategies

    How are corrective waves created?

    Learn how traders and analysts identify corrective waves in the Elliot Wave Theory, a controversial and complicated market trading system.
  5. Economics

    How A Limited Government Affects A Country's Finances

    Countries with limited governments have fewer laws about what individuals and businesses can and can’t do. What's the net result?
  6. Investing Basics

    How Does Goodwill Affect Financial Statements?

    Goodwill is a bit of a paradox--intangible, yet it is recorded as an asset on the purchasing company's balance sheet.
  7. Investing Basics

    Using Normal Distribution Formula To Optimize Your Portfolio

    Normal or bell curve distribution can be used in portfolio theory to help portfolio managers maximize return and minimize risk.
  8. Trading Strategies

    Swing Trading Indicators: For Those Too Impatient For Buy And Hold

    For investors who are too impatient for the buy and hold strategy, swing trading may be your thing--but seriously, be careful.
  9. Investing Basics

    R-Squared

    Learn more about this statistical measurement used to represent movement between a security and its benchmark.
  10. Insurance

    The Government And Risk: A Love-Hate Relationship

    Though the U.S. government can help its citizens by subsidizing risky loans, the costs always come back to the taxpayers.

You May Also Like

Hot Definitions
  1. Santa Claus Rally

    A surge in the price of stocks that often occurs in the week between Christmas and New Year's Day. There are numerous explanations ...
  2. Commodity

    1. A basic good used in commerce that is interchangeable with other commodities of the same type. Commodities are most often ...
  3. Deferred Revenue

    Advance payments or unearned revenue, recorded on the recipient's balance sheet as a liability, until the services have been ...
  4. Multinational Corporation - MNC

    A corporation that has its facilities and other assets in at least one country other than its home country. Such companies ...
  5. SWOT Analysis

    A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, ...
  6. Simple Interest

    A quick method of calculating the interest charge on a loan. Simple interest is determined by multiplying the interest rate ...
Trading Center