Background Note | HBS Case Collection | June 2005 (Revised October 2007)

Market Efficiency

by Joshua D. Coval, Erik Stafford, Rodrigo Osmo, John Jernigan, Zachary Page and Paul Passoni

Abstract

Covers how prices react to information, the incentives for bringing information into prices, and the paradox of market efficiency in equilibrium--for investors to work hard keeping markets efficient, they must always be somewhat inefficient at the margin. Uses separate financial market simulation software.

Citation:

Coval, Joshua D., Erik Stafford, Rodrigo Osmo, John Jernigan, Zachary Page, and Paul Passoni. "Market Efficiency." Harvard Business School Background Note 205-081, June 2005. (Revised October 2007.)