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'It is often argued that because the Stock Exchange is an efficient market, share prices follow a random walk'. - Expand what this statement means.
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'It is often argued that because the Stock Exchange is an efficient market, share prices follow a random walk'. - Expand what this statement means. Assuming that the statement is correct, what are the implications for an individual contemplating buying shares? There are two types of market: the primary market and the secondary market. The primary market brings together investors (buyers) and issuers (sellers) either directly or through intermediaries (stockbrokers) to buy and sell stocks and shares. Once bought, they are then in what is known as the secondary market. The diagram below shows the link between the primary and secondary markets. When people talk about financial markets being efficient markets they are actually talking about the secondary market. The secondary market brings together investors wanting to sell and investors willing to buy, increasing the liquidity of the shares traded. The secondary market also indirectly encourages new financing therefore making it easier for...
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