CORPORATE FINANCE

Corporate Finance



Corporate Finance

Introduction

One of the main reasons for the existence of stock markets is the liquidity, understood as the ease with which financial assets are transferred impairment. Thus, the stock market facilitates the exchange of such assets, as without it would be necessary to incur high financial costs and time for a transaction. Therefore, the stock market reduces these transaction costs in large part, providing a quick, accurate and free of the real value of assets financial exchange in it. Not all assets are traded in financial markets have the same liquidity, a way to see what assets are more liquid and the least is to compare the difference between the buyer and the average bid price offered in the financial intermediaries. The smaller this difference is more liquid assets, while if it is large will mean that the lack of liquidity makes at greater risk to intermediary because if it buys us take time to get rid of Also, during which can depreciate by the intermediary incurs a loss. This paper will answer the question that Do major stock markets present investors with the opportunity for abnormal gain? And if they do why are we all not wealthy?

Literature Review

A stock market is efficient when the very dynamics of the market that quickly leads to balance the performance s and the risk s of different titles or portfolio s of titles. For a market to be efficient must meet the following three conditions: that the goods the subject of exchange is standardized and is homogeneous, there are many participants (buyer's and sellers) and is relatively easy to enter and exit the market. In short, a market is efficient when all relevant information is the scope of the investor is and the price s of titles reflects this information. Market where the price s defined in the transactions reflects a high level of competition among the various participants and efficient use of all information available.

A stock market is efficient when the competition among different agent s (investors) involved in it, guided by the principle of maximum benefit , leading to situations of equilibrium in which at all times the price of any financial asset ( shares , obligations , public funds , etc.) provides a good estimate of its intrinsic value . From the standpoint of modern selection theory of portfolio s and the balance in the capital market. The stock market is efficient when the dynamics of the own market leads immediately to a situation in which balanced performance s risk s of the various asset s that are traded on the same (active individual s or portfolios). This second meaning of efficient market is used with increasing frequency. The theory of efficient markets was developed in parallel to the theory of equilibrium in the capital market, even ahead of time, and hence the methodological divorce between theories over and over. There are three forms or levels of efficiency that can be seen in a stock market: the weak form, the intermediate form and strong form. According to the hypothesis of weak efficient market, the number s historical price s of the securities does not contain information that can be used to predict the price s future, ...