Its competition for information that makes securities markets efficien

QUESTION

Its competition for information that makes securities markets efficient. Is this statement correct? Explain.
This is a true statement. To make markets efficient means that current prices for assets reflect ALL known and important information regarding what the asset should be priced at. Because there are arbitrage opportunities in finding the “real” price of a stock, investors are constantly looking for additional information that would more accurately price the asset. For example, if you know that a drug would fail FDA testing,

t the market didnt price that in, an investor would likely try to spend time and money in trying to find this information so that he could sell short the shares to benefit from the mispricing. It is because of this competition for information that create a relatively efficient market.

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