easy · Market Microstructure
According to the 'Grossman-Stiglitz Paradox,' why can markets never be perfectly informationally efficient?
- Most traders are irrational and ignore fundamental data.
- High-frequency traders cancel orders too quickly for the information to be absorbed.
- If prices were perfectly efficient, there would be no profit incentive to collect the information required to make them efficient.
- Regulatory barriers prevent traders from acting on all available information.
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