Inefficient Market

What is Inefficient market.?

It’s a theory that asserts how market prices of common stocks as well as similar securities are not necessarily always accurately priced, and in fact, tend to fluctuate from the real discounted value of their forthcoming cash in-flows. This is, by definition, an exact opposite of the hypothesis dubbed efficient market.
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Inefficient market is often used to denote a market that can not operate with efficiency. For example, it is sometimes argued that the low-volume stocks traded over-the-counter comprise a highly inefficient market as compared to blue chip stocks.

The inefficient market hypothesis and the proponents associated with it urge that market forces, at times, compe,s asset prices to rise or fall from their actual values. To back that argument, they cite examples of market crashes/upward spikes whose existence as well as magnitude seem totally incompatible from an efficient market point of view.

Edited and Updated 15th February 2014

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