Informationally Efficient Market

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.

BREAKING DOWN '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.

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RELATED FAQS
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    Explore the efficient market hypothesis and understand the extent to which this theory and its conclusions are correct or ... Read Answer >>
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    Discover how the efficient market theory is broken down into three versions, the hallmarks of each and the anomalies that ... Read Answer >>
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