Economic for Managers Essay Example | Topics and Well Written Essays - 2500 words

Economic for Managers - Essay ExampleThe failure in major financial commercialiseplaces exists because of each of these conditions. earlier to the financial crisis, the financial markets such as shoots, bonds and mutual funds markets ar considered markets where the invisible hand operates. The stock market has always been referred to as an high-octane market by economists. According to Brealey, Myers and Marcus, the competition in this market to find mis valued stocks is intense. So when new cultivation comes out, investors rush to take advantage of it and thereby eliminate any profit opportunities (2004, 165).An efficient market, according to Samuelson and Nordhaus in their book Economics is defined as one where all new information is quickly understood by market participants and becomes immediately incorporated into the market prices (2004, 534). This characteristic of the stock market as an efficient market is attributed to the availability of timely information which is i ncorporated in the prices of the stocks.The stock market indeed needs investors who believe that the market is inefficient in order to make the market efficient. As investors think that there is a certain degree of inefficiency in the market, these investors notion of the stock prices are that they are underpriced, and there is a chance to profit from this situation.Therefore, as investors believe in this inefficiency, and the possible reward of profiting from these undervalued stocks, they are driven to action. When investors are driven to action, they look for more sources of information, analyze the information and push the prices up or down depending on the value of the information as regards the certain stock. When investors are prompted to take action either by driving the prices of the stocks up or down depending on the information, the direction of the prices tend to be that which incorporates the value of the informationthus, eliminating the possible profits from buying