Market Efficiency.

Abstract ABSTRACT: Efficient market research arose in response to allegations from the professional investment community and critics of financial accounting, and it preceded a formal, conceptual development of market efficiency. Several ambiguities exist with respect to previous definitions of market efficiency. Market efficiency is defined here in terms of the equality of security prices under two information configurations (i.e., with and without universal access to the information system of interest). Casually, a securities market is efficient with respect to an information system if and only if security prices act as if everyone knows that information system. If this condition holds, prices are said to "fully reflect" the .information system. Several attributes of this definition are advantageous, relative to those, of earlier definitions.