Efficiency of Financial Markets

This has been taken from our blog,Brinks of economic thoughts.

Efficiency of financial markets

 

Financial markets are very crucial part of a modern economy, we have by now come across an understanding that financial markets do provide an opportunity to the peoples who have an excess of funds or surplus of funds to interact in a market place and meet with peoples who have an deficit of funds,,,financial markets help in channelizing the funds and attaining efficiency and profit maximising intention too.

 

For proper functioning and  efficiency of a market it is important that market is fully regulated, and properly monitored,,

 

With advent of more and more demand of increasing deregulation, we are witnessing newest of financial explorations in terms of financial products, [like credit default swaps,,these were considered as weapons of mass economic catastrophe by WARREN BUFFET] ]it is not known many a times that these product are how much toxic in naturehow much can they hurt an economy if they falter..,

 

In  a way financial economy has taken over the true economic production,,,we see an era when financial products are created to make more and more profits, after the downfall of 2008 there were many a times questions raised about the use of such innovative operations,,,

 

To ensure that markets work efficiently, these explorations should be accompanied with very strong and stringent regulation framework..

Then important is free flow of information, proper information should be available to investors,,,

 

Another tendency which is widely witnessed is of insider trading,,this has to be curtailed,,,eg,rajat gupta of board of goldman sachs was responsible for insider trading .

Insider trading is when one of the prominent members of a board of company who has an excess to confidential reports of company, leaks them to outside to make individual profits.

So important thing for efficient markets is a market which is fully regulated,,,well monitored,,,allows every one to participate,,,also ensures that information is available to all,,and keeps a necessary check on the insider trading.

 

Harsh Vardhan Pathak

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