discussion board reply 32

  1. A definition of the key term: this does not count in the 200 word minimum requirement.
  2. A summary, in your own words, of the selected article.
  3. A discussion, in your own words, of how the article relates to the selected chapter and key term.
  4. The complete citation, in APA format, of each of the 3 articles read and any other additional references; these do not count in the 200-word requirement.
  5. All references must be annotated. REPLY TO THIS STUDENT.

Definition: inefficient markets is one in which prices do reflect all available information. In an inefficient market forward exchange rates will not be the best possible predictors of future spot exchange rates.

The Economist article,Beating the Market: Yes, it can be done

Oct 16th, 2013

by The Economist online

The article, Beating the Market: Yes, it can be done, covers many decades of research into the rise and fall of efficient and inefficient markets. In 1953 Maurice Kendall discovered that “instead of behaving in predictable ways, share and commodity prices follow a “random walk”. At any moment it was impossible to tell what prices would be a moment later. This, said theorists, is because prices are “efficient” –they reflect all available facts. Future prices differ from current prices only if buyers or sellers get new information. This, by definition, is unpredictable (or “random”).

So, if you have the information you can be efficient in the market. Unfortunately, you don’t always have all the necessary information to make the accurate decisions. This effects your investments and how well they perform. Therefore, the risk is larger in an inefficient market. Charles Goodhart of London says that there is no better theory to describe the efficient/inefficient market risk.

Discussion: I am not sure about you, but the market is very confusing to me sometimes. I have learned that this is true of most people. The risk you take investing your money in the market varies greatly. If the risk is slight the growth potential is usually low, If the risk is higher the return is usually higher if it works out to the good for you. My father was a gambler in his younger days, and I learned very early how to play cards but the one thing I learned was calculate the risk in every hand, if it is not worth the risk fold. This lesson my father taught me can definitely be applied to the stock market.


2013. “Beating the Market: Yes, It Can be Done.” The Economist Online. https://www.economist.com/free-exchange/2013/10/16…



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