Market efficiency is where all critical information on the value of different securities is quickly and accurately incorporated into their respective prices in real time. This market allows the fluctuations in security depending on the current benefits of cash flow to be easily reflected in the present stock prices (Steven, 2008) . This paper will explain what it means to have an efficient capital, the behavioural challenges in achieving efficiency, forms of market efficiency, the implications of the active market to corporate finance and whether or not real estate is an inefficient market.
This is a market is where the stocks prices ultimately reflect the information available. This market has both advantages and disadvantages for the companies as well as the potential investors, companies and corporate enterprises can’t make profits by fooling the potential investors in such a market (Steven, 2008) . There exist 3 conditions that whenever any one of the three holds, then the market can be said to be efficient . This conditions further forms the basis for the behavioural challenges of market efficiency. They include; rationality, this is where all the investors in the market are rational and will sensibly alter their approximate security prices. This becomes a behavioural challenge in that not all investors will always act rationally; irrationality is also evident in the investment markets.
Delegate your assignment to our experts and they will do the rest.
The second condition and behavioural challenge is independent deviations from rationality; this is where all the investors will react to the information available on security prices in a pessimistic way (Fama, 2010) ; this becomes a challenge since deviations from independent investors rationality are less likely to be random. Individuals tend to deviate from rationality depending on various primary principles. The last condition for an efficient market is arbitrage, and this is where professionals and amateurs in the stock market will determine the dynamic of the market capital; this becomes a challenge since professionals can sell mispriced securities to fans and this can be a threat to the efficiency of the market.
There exist 3 forms of market efficiency; they include; a weak-form capital market which states that present prices reflect the information available entirely; this shows that all information in stock prices is in the current rates (Coval, 2008) . Semi-strong efficient capital market states that all information available in public is included in stock prices. The report comprises of the company's financial statements, articles and news. The other type of capital market is a strong-form hypothesis which referred to as a perfect market; it states that inside private data and information is not helpful, nobody contains the information on the direction of the security prices and demand.
The implications of the efficient capital market to corporate finance include; managers in corporate firms should maximise the present market overall value of their company, there is no advantage in the manipulation of earnings per stock share (Coval, 2008) . Other implications of market efficiency are returns from securities. Dividends are necessary measures used in evaluating the performance of the company. If new stocks avail in the market at a price that fully reflects an evaluation of payoffs in the future, then all the concerns on dilution should be eradicated and lastly, the lengths in which financial capital markets fall short of the idea of market efficiency still provides an upper limit on the concerns. Real estate is not an efficient market because an active market usually assumes that the sellers, as well as the buyers, have enough information, in real estate, all data is not readily available (Steven, 2008) . More so, there might be multiple prices that are accurate for a property depending on what the person buying wishes to do with it. Prices available for the features do not mainly motivate the sellers in real estate.
References
Coval, J. (2008). Efficient Capital Markets and Behavioral Challenges. Journal of Finance , 2-24.
Fama, E. (2010). Review: Efficient Capital Markets. Journal on Finance , 380-470.
Steven, L. (2008). Efficient Capital Market . Journal of Finance , 10-22.
