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Term paper on Capital market efficiency
Finance & Accounting
Pages 25 (6275 words)
Capital market efficiency Capital market efficiency 1. 0 Introduction The performance of markets under different economic and political conditions has been highly explored in the literature. One of the most important challenges that modern markets have to face seems to be the following one: the information related to events that can influence the price of securities and other financial products are often incorrect.
In addition, reference is made to market ethics, at the level that ethics can secure, at least up to a level, market efficiency, being related to all three aspects of market efficiency, i.e. information, institutions and transactions. The literature developed in this field proves that existing research in regard to market risks and potentials focuses on the potentials of markets to become efficient but also on the ability of certain financial systems to promote market efficiency. This is the case of the Islamic finance system which is highly differentiated from the conventional finance system at the following point: in Islamic finance emphasis is given on the intervention of ethics in economic transactions. Because of this reason the reference to the Islamic finance system has been considered as quite necessary for evaluating the issues explored in this paper. It has been proved that it is not quite difficult for a market to be efficient, especially since efficient markets are not considered as perfect markets. Still, it can be rather difficult for those managing financial products to promote ethics in all financial transactions. Indeed, certain aspects of each market are not aligned with the rules of market efficiency, as analyzed below. ...
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