Capital market efficiency describes the degree to which asset prices reflect all available information. In an efficient market, prices adjust quickly and fully to new information, making it difficult for investors to consistently earn abnormal returns. This concept assesses how well capital markets allocate resources and price financial instruments. It is a core tenet in financial economics.
Context
A significant debate concerning capital market efficiency in the digital asset space involves whether cryptocurrency markets exhibit similar characteristics to traditional financial markets. Critical future developments include the impact of increased institutional participation and regulatory clarity on price discovery mechanisms. This provides essential context for analyzing news about market volatility, arbitrage opportunities, and the maturation of digital asset trading venues.
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