Informationally Efficient Market

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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.

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RELATED FAQS
  1. 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 ... Read Full Answer >>
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