Evaluating Market Efficiency: A Report on Economic Principles

This report explores the concept of market efficiency, particularly focusing on the efficient market hypothesis. The student initially expected a straightforward answer regarding market efficiency but found the topic more complex after watching a video. The student's perspective shifted from believing markets are efficient to considering efficiency based on time frames, suggesting short-term inefficiencies and long-term efficiency due to the availability of comprehensive market information. The video prompted the student to question the equal access to market information and the validity of the efficient market hypothesis. The student acknowledges the limitations of economic models, recognizing that no single theory fully captures market attributes. The report concludes that answering the question of market efficiency requires comprehensive analysis, considering various factors influencing market operations. The student emphasizes that no model is perfect and that understanding the limitations of economic models and ensuring sufficient market information are crucial for addressing market inadequacies.

Running head: ARE MARKETS EFFICIENT?
Are Markets Efficient?
Student Name
Institutional Affiliation

ARE MARKETS EFFICIENT? 2
Are Markets Efficient?
What was your expectation before watching the video?
My expectation before watching this video was that I would get a precise and
articulate response to whether markets are efficient. In essence, I thought that the two experts
would provide a comprehensive explanation of why markets are efficient or inefficient. Over
the years, I believed that it is possible to outline specific issues that make markets to be
efficient or inefficient. Considering the popularity of the efficient market hypothesis and the
significant amount of empirical studies supporting its propositions, I thought it would be easy
to explain why markets are efficient.
How has this changed after watching it?
After watching this video, I have understood that explaining market efficiency is a
challenging task. Initially, I believed that markets are efficient. However, after watching this
video, I have started questioning this stance. In essence, I now believe that market efficiency
should be based on a specific time frame. For instance, I think that markets are inefficient in
the short-term but efficient in the long-term. This view is supported by the fact that as time
progress, comprehensive market information becomes available to players in the market.
Nonetheless, this video has convinced me that market efficiency is not a simple concept as I
initially thought.
Has the video helped change your perspective about the issues?
This video has played a significant role in changing my perspectives on issues such as
market efficiency and market bubble. Specifically, this video has enhanced my understanding
of how the market operates, enabling me to have a more comprehensive view of market
operations. For instance, this video made me question if it is possible for all market players to
have equal access to market information. Practically, it is impossible for all parties in the
market to have equal access to information. This probability questions the validity of the

ARE MARKETS EFFICIENT? 3
efficient market hypothesis. Besides, Thaler’s admission that it is challenging to test the
efficient market hypothesis has made me embrace a more liberal approach to understanding
market efficiency. As a result, I now believe that markets can either be efficient or inefficient
based on arguments that a person uses to defend their stance.
How do you relate video to the learning on the module?
This video concurs with the arguments of the materials explored in the learning
module that all theories have inadequacies and that markets are complex entities that cannot
be understood comprehensively through assumptions. In practice, this video confirms that no
single economic theory captures all the attributes of the market. However, this inability does
not indicate that these theories are erroneous. The learning module insisted on understanding
the strengths and weaknesses of economic models. In line with this deliberation, this video
confirms that the efficient market hypothesis does not capture all the attributes of the market.
What have you learned that you can pass on to others?
I have learned that a yes or no response cannot answer the question of whether
markets are efficient or not. Instead, answering this question requires comprehensive analysis
and consideration of multiple factors that shape market operations. Besides, I have learned
that no model is completely right. As a result, when applying any economic model, one needs
to have a comprehensive understanding of its limitations. Importantly, I have learned that
market inadequacies can only be eradicated by the availability of sufficient market
information.