One measure of market efficiency is the speed with which prices adjust to new information. We develop a simple approach to estimating these price adjustment coefficients by using the information in return processes. This approach is used to estimate the price adjustment coefficients for firms listed on the NYSE and the AMEX as well as for over‐the‐counter stocks. We find evidence of a lagged adjustment to new information in shorter return intervals for firms in all market value classes, and some support for the proposition that prices adjust much more slowly and with more noise for smaller firms.
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Aswath Damodaran (1993) studied this question.
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