Efficient Market View.docx

Efficient Market VIew great deal of debate revolves

are und the issue of whether markets themselves are -efficient or

flicien forecast' to it finect ne exchange rates. A market is ejictenf of prices of financial instruments. me

w PU mformatton made available to traders. The efficient market view thus holds that prices of financial instruments reflect all publicly available information at any given ume. As applied to exchange rates, this means that forward exchange rates are accurate

forecasts of future exchange rates. Recall from Chapter that afonvard exchange rate reflects a marltet's expectations about the values Of two Currencies-. -In an efficient currency market, forward exchange rates reflect all relevant publicly available information at any given time: they are considered the best possible predictcrs of exchange rates. Proponents of.this view. hold that there is no other publicly available could improve the forecast of exchange rates over that provided byforward rates. To

lintmation that adapt this view is to accept that compares do waste time and money collecting and exammmg infurmation believed to affect future exchange rates.- But there is always certain' amount of deviaThe fact that fotrwatd exchange rates are. less than

dion baween forward and actual exchange rates.

to.seau'ch

'for more accurate forecasting techniques.

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