Perfect capital market

Capital market is a financial market where agents make transactions, mostly stocks, representing the companies financial assets.

A perfect market is a market in which there are never any arbitrage opportunities.

A Capital Market is perfect when any of the investors have enough power to change the price of an asset and all of them have access to the same information. Also there are no taxes, so we could say that a perfect capital market doesn’t exist.

Main assumptions for a market to be efficient:

  • Lot of investors examine and rate securities for income.
  • Fresh information come to the market independent from other news and in a arbitrary way.
  • Stock values adjust rapidly to new information.
  • Stock values should reveal all existing information.